Marv Company's direct labor costs for manufacturing its only product were as follows for October:$\begin{array}{lrr}
\text { Standard direct labor hours (DLHs) per unit of product } & 2.0 \
\text { Budgeted finished units for the period } & 6,000 \
\text { Actual number of finished units produced } & 5,000 \
\text { Standard wage rate per direct labor hour (SP) } & \$ 20.00 \
\text { Direct labor costs incurred } & \$ 207,000 \
\text { Actual wage rate per direct labor hour (AP) } & \$ 18.00
\end{array}$The direct labor rate variance for October, rounded to the nearest dollar, was:
A) $3,000 unfavorable.
B) $20,000 favorable.
C) $23,000 favorable.
D) $30,000 unfavorable.
E) $50,000 unfavorable.

Question

Marv Company's direct labor costs for manufacturing its only product were as follows for October:$\begin{array}{lrr}
\text { Standard direct labor hours (DLHs) per unit of product } & 2.0 \
\text { Budgeted finished units for the period } & 6,000 \
\text { Actual number of finished units produced } & 5,000 \
\text { Standard wage rate per direct labor hour (SP) } & \$ 20.00 \
\text { Direct labor costs incurred } & \$ 207,000 \
\text { Actual wage rate per direct labor hour (AP) } & \$  18.00
\end{array}$The direct labor rate variance for October, rounded to the nearest dollar, was:
A) $3,000 unfavorable.
B) $20,000 favorable.
C) $23,000 favorable.
D) $30,000 unfavorable.
E) $50,000 unfavorable.

Quizplus · Accepted Answer

The direct labor rate variance is calculated as (Standard Price (SP) - Actual Price (AP)) * Actual Hours (AH). The actual hours (AH) can be found by dividing the total direct labor costs incurred by the actual wage rate per direct labor hour, which is $207,000 / $18 = 11,500 hours. The variance is then (20 - 18) * 11,500 = $23,000 favorable, because the actual price per hour was less than the standard price.

Marv Company's Direct Labor Costs for Manufacturing Its Only Product