A job was budgeted to require 3 hours of labor per unit at $8.00 per hour. The job consisted of 8,000 units and was completed in 22,000 hours at a total labor cost of $198,000. What is the direct labor rate variance?

Question

Quizplus · Accepted Answer

The direct labor rate variance is calculated as (Actual Hours x Actual Rate) - (Actual Hours x Standard Rate). The actual rate is $198,000 / 22,000 hours = $9.00 per hour. The standard rate is $8.00 per hour. The variance is 22,000 hours x ($9.00 - $8.00) = $22,000 unfavorable.

A Job Was Budgeted to Require 3 Hours of Labor