Figure 10-8. The Perfect Tool Company (South America Division)produced 80,000 saw blades during the year.It took 1.5 hours of labor per blade at a rate of $8.50 per hour.However,its standard labor rate is $8.00.Its labor efficiency variance was an unfavorable $40,000.
Refer to Figure 10-8.What is Perfect's labor rate variance?

Question

Quizplus · Accepted Answer

To find out labor rate variance, we use the formula: 
(Labor rate per hour - Standard labor rate per hour) x Actual hours worked
Here, Labor rate per hour = $8.50
Standard labor rate per hour = $8.00
Actual hours worked = 80,000 x 1.5 = 120,000
Labor rate variance = (8.5 - 8.0) x 120,000 = $60,000 U 
Therefore, the best choice is C.