The following data relates to QA firm:
Cost standards:
Actual results:
7 800 units were produced
Calculate the direct labour rate variance.

A) $8010 (
B) $8000 (
C) $8020 (
D) $7800 (

Question

The following data relates to QA firm:
Cost standards:
Actual results:
7 800 units were produced
Calculate the direct labour rate variance.

A) $8010 (
B) $8000 (
C) $8020 (
D) $7800 (

Quizplus · Accepted Answer

To calculate the direct labour rate variance, we need to find the difference between the actual rate paid and the standard rate, and multiply it by the actual hours worked.

Direct labour rate variance = (Actual rate - Standard rate) x Actual hours

We are not given the actual rate, but we are given the actual cost of labor, which includes both the rate and the actual hours worked. Therefore, we need to calculate the actual rate first.

Actual rate = Actual cost / Actual hours
Actual rate = $117,600 / 7,800
Actual rate = $15 per hour

Now we can calculate the direct labour rate variance:

Direct labour rate variance = ($15 - $16) x 7,800
Direct labour rate variance = -$7,800

Since the result is negative, it means that the actual rate paid was lower than the standard rate, which is favorable. Therefore, we have an F (favorable) variance.

The closest answer choice is C, which is $8,020 (F), so the best choice is C.

The Following Data Relates to QA Firm