The standard costs and actual costs for direct materials,direct labor,and factory overhead for the manufacture of 2,500 units of product are as follows:
Variable cost @ $2 per hour
Total variable cost,$18,000
Fixed cost @ $0.80 per hour
Total fixed cost,$8,000
-The amount of the direct labor rate variance is
A)$4,440 unfavorable.
B)$4,500 favorable.
C)$4,440 favorable.
D)$4,500 unfavorable.

Question

The standard costs and actual costs for direct materials,direct labor,and factory overhead for the manufacture of 2,500 units of product are as follows:
  Variable cost @ $2 per hour
Total variable cost,$18,000
Fixed cost @ $0.80 per hour
Total fixed cost,$8,000
-The amount of the direct labor rate variance is
A)$4,440 unfavorable. 
B)$4,500 favorable. 
C)$4,440 favorable. 
D)$4,500 unfavorable.

Quizplus · Accepted Answer

The direct labor rate variance is calculated as follows:

Actual Hours Worked x (Actual Rate - Standard Rate)

For 2,500 units, the standard cost of direct labor is $2 per hour, and the fixed cost is $0.80 per hour.

The actual cost of direct labor is not given, so let's assume that the actual rate paid was also $2 per hour.

Actual Hours worked = Total Direct Labor Cost / Actual Rate 
= $18,000 / $2 
= 9,000 hours

Direct Labor Rate Variance = 9,000 hours x ($2 - $2) 
= $0

Therefore, the direct labor rate variance is $0 or zero variance, which is favorable. The correct answer is C, $4,440 favorable, which is not provided as an option.

The Standard Costs and Actual Costs for Direct Materials,direct Labor,and