Standard Faucets uses standard costing and recorded the following data for the month of August: $\begin{array}{lr}
\text { Standard direct labor rate } & \$ 10.00 \text { per hour } \
\text { Standard hours allowed for actual production } & 20,000 \text { hours } \
\text { Actual direct labor rate } & \$ 10.50 \text { per hour } \
\text { Labor efficiency variance } & \$ 5,000 \text { favorable }
\end{array}$ How much is the labor rate variance for August?

Question

Quizplus · Accepted Answer

The labor rate variance is calculated as (Actual Rate - Standard Rate) x Actual Hours Worked. Given the labor efficiency variance is $5,000 favorable, the actual hours worked must be less than the standard hours allowed. Assuming actual hours worked are 19,500 (20,000 - 500), the labor rate variance is ($10.50 - $10.00) x 19,500 = $9,750 unfavorable.

Standard Faucets Uses Standard Costing and Recorded the Following Data