Europa Company manufactures only one product. Presented below is direct labor information for November. $\begin{array}{lr}
\text { Standard direct labor hours per unit of product } & 3.20 \
\text { Number of finished units produced } & 6,500 \
\text { Standard wage rate per direct labor hour (SP) } & \$ 19.20 \
\text { Total direct labor pavroll for the period } & \$ 359.424\
\text { Actual wage rate per direct labor hour worked (AP) }&\$16.00
\end{array}$The direct labor flexible-budget variance for November, to the nearest dollar, was:
A) $26,624 unfavorable.
B) $31,949 unfavorable.
C) $39,936 favorable.
D) $71,885 favorable.
E) $103,834 favorable.

Question

Quizplus · Accepted Answer

The direct labor flexible-budget variance is calculated as the difference between the total direct labor cost at the standard rate and the total direct labor cost at the actual rate for the actual hours worked. First, calculate the total standard hours for the actual production: $6,500 \text{ units} \times 3.20 \text{ hours/unit} = 20,800 \text{ hours}$. Then, calculate the total labor cost at the standard rate: $20,800 \text{ hours} \times \$19.20/\text{hour} = \$399,360$. The actual total labor cost is given as \$359,424. The variance is $ \$399,360 - \$359,424 = \$39,936$ favorable, because the actual cost is less than the standard cost.

Europa Company Manufactures Only One Product The Direct Labor Flexible-Budget Variance for November, to the Nearest