The following data relate to product no. 33 of La Quinta Corporation:
Direct labor standard: 5 hours at $14 per hour
Direct labor used in production: 45,000 hours at a cost of $639,000
Manufacturing activity: 8,900 units completed
The direct-labor rate variance is:
A) $8,900F.
B) $8,900U.
C) $9,000F.
D) $9,000U.
E) None of the other answers are correct.

Question

Quizplus · Accepted Answer

To calculate the direct-labor rate variance, we need to compare the actual cost of direct labor used to the standard cost of direct labor allowed.
Standard cost of direct labor allowed = Direct labor standard rate × Actual hours worked
= $14 × 45,000
= $630,000
Actual cost of direct labor used = $639,000
Direct-labor rate variance = Actual cost of direct labor used - Standard cost of direct labor allowed
= $639,000 - $630,000
= $9,000U (unfavorable because the actual cost is higher than the standard cost)

The Following Data Relate to Product No