Welch Company budgeted the following cost standards for the current year: Direct materials = 1.40 kilos per unit @ $1.50 per kilo
Direct labor = 0.75 hours per unit @ $6 per hour
Actual production and costs were as follows:
Units produced = 2,800
Direct materials used = 4,500 kg.
Direct materials purchased = 5,000 kg. @ a cost of $5,850
Direct labor incurred = 2,000 hours at a cost of $13,000
The labor price variance was
A) $600 F
B) $400 U
C) $4,800 F
D) $1,000 U

Question

Quizplus · Accepted Answer

To calculate the labor price variance, we need to compare the actual labor rate with the standard labor rate. 
Standard hours = 2,800 x 0.75 = 2,100 hours
Standard labor cost = 2,100 x $6 = $12,600
Actual labor rate = $13,000/2,000 hours = $6.50 per hour
Standard labor rate = $6 per hour
Labor price variance = (Actual labor rate - Standard labor rate) x Actual hours
= ($6.50 - $6) x 2,000 = $1,000 unfavorable (U)

Welch Company Budgeted the Following Cost Standards for the Current