Newbill Enterprises recently used 24,000 labor hours to produce 8,600 completed units. According to manufacturing specifications, each unit is anticipated to take 2.75 hours to complete. The company's actual payroll cost amounted to $456,000. If the standard labor cost per hour is $19.20, Newhart's labor rate variance is:
A) $1,920U.
B) $1,920F.
C) $4,800U.
D) $4,800F.
E) none of the other answers are correct.

Question

Quizplus · Accepted Answer

The labor rate variance is calculated as (Actual Hours x Actual Rate) - (Actual Hours x Standard Rate). Here, (24,000 x $19.00) - (24,000 x $19.20) = $456,000 - $460,800 = $4,800F.

Newbill Enterprises Recently Used 24,000 Labor Hours to Produce 8,600