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 total direct labor variance for October, rounded to the nearest dollar, was:
A) $7,000 unfavorable.
B) $9,000 favorable.
C) $9,000 unfavorable.
D) $32,000 favorable.
E) $54,000 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 total direct labor variance for October, rounded to the nearest dollar, was:
A) $7,000 unfavorable.
B) $9,000 favorable.
C) $9,000 unfavorable.
D) $32,000 favorable.
E) $54,000 unfavorable.

Quizplus · Accepted Answer

The total direct labor variance is the sum of the direct labor rate variance and the direct labor efficiency variance. The direct labor rate variance is calculated as the difference between the actual wage rate and the standard wage rate, multiplied by the actual number of direct labor hours worked. The direct labor efficiency variance is calculated as the difference between the standard direct labor hours allowed for the actual output and the actual number of direct labor hours worked, multiplied by the standard wage rate.In this case, the actual wage rate is $18.00 per hour, the standard wage rate is $20.00 per hour, and the actual number of direct labor hours worked is 5,000 hours. The standard direct labor hours allowed for the actual output is 2.0 hours per unit, multiplied by 5,000 units, which equals 10,000 hours.The direct labor rate variance is calculated as ($18.00 - $20.00) x 5,000 hours = $10,000 unfavorable. The direct labor efficiency variance is calculated as (10,000 hours - 5,000 hours) x $20.00 per hour = $100,000 favorable.The total direct labor variance is the sum of the direct labor rate variance and the direct labor efficiency variance, which is $10,000 unfavorable + $100,000 favorable = $90,000 favorable.

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