Carlton Corporation Carlton Corporation produces and sells faux-leather handbags. In the current year, the company budgeted for the production and sale of 1,000 handbags; however, 900 handbags were actually produced and sold. Each bag has a standard requiring two yards of material at a cost of $4.00 per yard and 1 hour of assembly time at a cost of $9.50 per hour. Actual costs for the production of 900 bags were $7,215 for materials (1,850 yards purchased and used @ $3.90 per yard) and $10,125 for labor (1,125 hours @ $9.00 per hour).
Refer to the Carlton Corporation information above. Carlton's direct labor rate variance is:
A) $562.50 F.
B) $562.50 U.
C) $450.00 F.
D) $450.00 U.

Question

Quizplus · Accepted Answer

The direct labor rate variance is calculated as (Actual Hourly Rate - Standard Hourly Rate) x Actual Hours Worked. Here, the standard rate is $9.50 per hour, the actual rate is $9.00 per hour, and the actual hours worked are 1,125 hours. The calculation is (9.00 - 9.50) x 1,125 = -$562.50, indicating a $562.50 favorable variance because the actual cost was less than the standard cost.

Carlton Corporation Carlton Corporation Produces and Sells Faux-Leather Handbags