The Flapjack Corporation had 8,200 actual direct labor hours at an actual rate of $12.40 per hour. Original production had been budgeted for 1,100 units, but only 1,000 units were actually produced. Labor standards were 7.6 hours per completed unit at a standard rate of $13.00 per hour. Compute the labor rate variance.
A) 4,920U
B) 4,920F
C) 4,560U
D) 4,560U.

Question

Quizplus · Accepted Answer

Labor rate variance measures the difference between the actual rate paid and the standard rate for labor.

Actual hours worked = 8,200
Actual rate per hour = $12.40
Standard rate per hour = $13.00

Labor rate variance = (Actual rate - Standard rate) * Actual hours worked
Labor rate variance = ($12.40 - $13.00) * 8,200
Labor rate variance = $(-0.60) * 8,200
Labor rate variance = $-4,920

Since the actual rate is lower than the standard rate (i.e., the actual rate is unfavorable), the variance is unfavorable. Therefore, the answer is option B, $4,920F (favorable).

The Flapjack Corporation Had 8,200 Actual Direct Labor Hours at an Actual