Trendy T's Corporation manufactures t-shirts, which is its only product. The standards for t-shirts are as follows: During the month of January, the company produced 1050 t-shirts. Related production data for the month follows:
What is the direct labor rate variance for the month?
A)$1480 favorable
B)$1480 unfavorable
C)$7040 favorable
D)$7040 unfavorable

Question

Trendy T's Corporation manufactures t-shirts, which is its only product. The standards for t-shirts are as follows:  During the month of January, the company produced 1050 t-shirts. Related production data for the month follows:
 What is the direct labor rate variance for the month?
A)$1480 favorable 
B)$1480 unfavorable 
C)$7040 favorable 
D)$7040 unfavorable

Quizplus · Accepted Answer

Direct labor rate variance = (Actual labor rate - Standard labor rate) x Actual hours worked
Actual labor rate = $24/hour
Standard labor rate = $22/hour
Actual hours worked = 16,800 minutes / 60 minutes/hour = 280 hours

Direct labor rate variance = ($24/hour - $22/hour) x 280 hours = $560 favorable per month

Therefore, the correct answer is A) $1480 favorable, which is derived as follows:
Direct labor rate variance = $560 favorable per month
Total labor cost variance = Direct labor rate variance + Direct labor efficiency variance
Total labor cost variance = $560 favorable per month + $920 favorable per month = $1480 favorable per month

Trendy T's Corporation Manufactures T-Shirts, Which Is Its Only Product