Green Toys is a regional manufacturer of baby toys produced from plastic derived from organic and non-toxic sources. Management budgeted one-half hour of direct labor per toy at a standard rate of $16.50 per hour. The most current production run produced 1600 toys and used 1750 labor hours at a total cost of $29,750. What is the direct labor rate variance for this production run?

Question

Quizplus · Accepted Answer

The direct labor rate variance measures the difference between the actual rate paid and the standard rate per hour.

Standard labor cost = (1/2 hour per toy) x ($16.50/hr) = $8.25 per toy
Actual labor cost = $29,750 / 1600 toys = $18.59 per toy

The actual rate paid per hour is calculated as:
Actual rate = Actual labor cost / Actual hours worked = $29,750 / 1750 hours = $17 per hour

Therefore, the direct labor rate variance is:
Variance = Actual hours worked x (Actual rate - Standard rate)
Variance = 1750 hours x (($17/hr) - ($16.50/hr))
Variance = $875 unfavorable

So the best choice is B, which is the correct answer with the explanation.

Green Toys Is a Regional Manufacturer of Baby Toys Produced