Borden Enterprises uses standard costing.For the month of April,the company reported the following data:
$\bullet$ Standard direct labor rate: $10 per hour
$\bullet$ Standard hours allowed for actual production: 8,000 hours
$\bullet$ Actual direct labor rate: $9.50 per hour
$\bullet$ Labor efficiency variance: $4,800 Favorable
The labor rate variance for April is:
A)$3,760 U
B)$3,760 F
C)$2,850 F
D)$2,850 U

Question

Borden Enterprises uses standard costing.For the month of April,the company reported the following data: 
$\bullet$ Standard direct labor rate: $10 per hour
$\bullet$ Standard hours allowed for actual production: 8,000 hours
$\bullet$ Actual direct labor rate: $9.50 per hour
$\bullet$ Labor efficiency variance: $4,800 Favorable
The labor rate variance for April is:
A)$3,760 U
B)$3,760 F
C)$2,850 F
D)$2,850 U

Quizplus · Accepted Answer

Labor efficiency variance = (AH - SH)SR
= (AH - 8,000 hours)$10 per hour = -$4,800
AH $\times$ $10 per hour - $80,000 = -$4,800
AH $\times$ $10 per hour = $75,200
AH = $75,200 $\div$ $10 per hour
AH = 7,520
Labor rate variance = AH(AR - SR)
= 7,520 hours ($9.50 per hour - $10.00 per hour)
= 7,520 hours (-$0.50 per hour)= $3,760 F

Borden Enterprises Uses Standard Costing ∙\bullet∙ Standard Direct Labor Rate: $10 Per Hour

Borden Enterprises Uses Standard Costing $\bullet$ Standard Direct Labor Rate: $10 Per Hour