Harris Manufacturing produces white sauce. It uses units as the cost driver for overhead. The following information was provided concerning its standard cost system for 2014:
$\begin{array}{ll}\text { Budgeted and Standard Data }&\text { Actual Data }\
\begin{array}{|l|l|}
\hline \text { Material } & 1 / 41 \mathrm{~b} . @ \$ 14 \text { per pound } \
\hline \text { Labor } & 1.4 \mathrm{hrs} @ \$ 16 \text { per hour } \
\hline \text { Total fixed overhead } & \$ 84,000 \
\hline \text { Variable overhead } & \$ 6.50 \text { per unit } \
\hline \text { Production } & 6,000 \text { units }\\hline
\end{array}&\begin{array}{|l|l|}
\hline \text { Produced } & 6,200 \text { units } \
\hline \text { Materials purchased } & 1,600 \mathrm{lbs} . \text { for } \$ 13.70 / \text { pound } \
\hline \text { Materials used } & 1,520 \mathrm{lbs} . \
\hline \text { Labor worked } & 8,740 \mathrm{hrs} . \text { at } \$ 15.90 / \text { hour } \
\hline \text { Total overhead } & \$ 122,000\\hline
\end{array}
\end{array}$
How much is the direct labor rate variance for 2014?

Question

Harris Manufacturing produces white sauce. It uses units as the cost driver for overhead. The following information was provided concerning its standard cost system for 2014:
$\begin{array}{ll}\text { Budgeted and Standard Data }&\text { Actual Data }\
\begin{array}{|l|l|}
\hline \text { Material } & 1 / 41 \mathrm{~b} . @ \$ 14 \text { per pound } \
\hline \text { Labor } & 1.4 \mathrm{hrs} @ \$ 16 \text { per hour } \
\hline \text { Total fixed overhead } & \$ 84,000 \
\hline \text { Variable overhead } & \$ 6.50 \text { per unit } \
\hline \text { Production } & 6,000 \text { units }\\hline 
\end{array}&\begin{array}{|l|l|}
\hline \text { Produced } & 6,200 \text { units } \
\hline \text { Materials purchased } & 1,600 \mathrm{lbs} . \text { for } \$ 13.70 / \text { pound } \
\hline \text { Materials used } & 1,520 \mathrm{lbs} . \
\hline \text { Labor worked } & 8,740 \mathrm{hrs} . \text { at } \$ 15.90 / \text { hour } \
\hline \text { Total overhead } & \$ 122,000\\hline
\end{array}
\end{array}$
How much is the direct labor rate variance for 2014?

Quizplus · Accepted Answer

The direct labor rate variance is calculated as (Actual Rate - Standard Rate) x Actual Hours Worked. The actual rate is $15.90, the standard rate is $16, and the actual hours worked are 8,740. Thus, the variance is ($15.90 - $16) x 8,740 = $874 favorable.

Harris Manufacturing Produces White Sauce How Much Is the Direct Labor Rate Variance for 2014