The following information describes a company's usage of direct labor in a recent period:
$$\begin{array} { | l | l | }
\hline \text { Actual direct labor hours used } & 44,000 \
\hline \text { Actual rate per hour } & \$ 20 \
\hline \text { Standard rate per hour } & \$ 18 \
\hline \text { Standard hours for units produced } & 42,000 \
\hline
\end{array}$$ How much is the direct labor price variance?
A) $84,000 favorable
B) $88,000 favorable
C) $88,000 unfavorable
D) $84,000 unfavorable

Question

The following information describes a company's usage of direct labor in a recent period:
$$\begin{array} { | l | l | } 
\hline \text { Actual direct labor hours used } & 44,000 \
\hline \text { Actual rate per hour } & \$ 20 \
\hline \text { Standard rate per hour } & \$ 18 \
\hline \text { Standard hours for units produced } & 42,000 \
\hline
\end{array}$$ How much is the direct labor price variance?
A) $84,000 favorable
B) $88,000 favorable
C) $88,000 unfavorable
D) $84,000 unfavorable

Quizplus · Accepted Answer

Direct labor price variance is calculated as (Actual Rate - Standard Rate) * Actual Hours = ($20 - $18) * 44,000 = $2 * 44,000 = $88,000 unfavorable.

The Following Information Describes a Company's Usage of Direct Labor