Solly Corporation produces a product for national distribution. Standards for the product are:Materials: 12 ounces per unit at 60¢ per ounce.Labor: 2 hours per unit at $8 per hour.During the month of December, the company produced 1,000 units. Information for the month follows:Materials: 14,000 ounces purchased and used at a total cost of $7,700.Labor: 2,500 hours worked at a total cost of $20,625.The labor rate variance is:
A) $625 Unfavorable
B) $500 Favorable
C) $500 Unfavorable
D) $625 Favorable

Question

Quizplus · Accepted Answer

The labor rate variance is calculated as (Actual Hours x Actual Rate) - (Actual Hours x Standard Rate). Here, (2,500 hours x $8.25) - (2,500 hours x $8) = $20,625 - $20,000 = $625 Unfavorable.

Solly Corporation Produces a Product for National Distribution