The Flapjack Corporation had 8,200 actual direct labor hours at an actual rate of $12.40 per hour. Original production had been budgeted for 1,100 units, but only 1,000 units were actually produced. Labor standards were 7.6 hours per completed unit at a standard rate of $13.00 per hour.
The labor time variance is
A) $9,880 favorable
B) $9,880 unfavorable
C) $7,800 unfavorable
D) $7,800 favorable

Question

Quizplus · Accepted Answer

Actual labor hours = 8,200
Actual labor rate = $12.40/hour
Actual labor cost = 8,200 x 12.40 = $101,680

Budgeted labor hours = 1,100 x 7.6 = 8,360
Budgeted labor cost = 8,360 x 13 = $108,680

Labor efficiency variance = (actual labor hours - budgeted labor hours) x standard labor rate
= (8,200 - 8,360) x 13
= -160 x 13
= -$2,080

As the actual labor hours are less than the budgeted labor hours, the labor efficiency variance is unfavorable.

Labor rate variance = actual labor hours x (actual labor rate - standard labor rate)
= 8,200 x (12.40 - 13)
= 8,200 x (-0.60)
= -$4,920

As the actual labor rate is less than the standard labor rate, the labor rate variance is also unfavorable.

Labor time variance = labor efficiency variance + labor rate variance
= -$2,080 - $4,920
= -$7,000

However, labor time variance is usually expressed in hours rather than in dollars. To convert it to hours, divide the variance by the standard labor rate:
Labor time variance in hours = -$7,000 ÷ $13
= -538.46 hours

Since the variance is negative, it means that actual labor hours were less than the standard labor hours by 538.46 hours. Therefore, the best choice is C, $7,800 unfavorable.

The Flapjack Corporation Had 8,200 Actual Direct Labor Hours at an Actual