Accurate Tax Returns budgets two direct labor hours for every tax return that it prepares,at a standard cost of $32 an hour.During the most recent year,500 returns were completed with the labor cost totaling $18,000.The actual labor cost was $36 per hour during that period.The actual number of labor hours was 1,000.What was the direct labor cost variance?

Question

Quizplus · Accepted Answer

First, we need to calculate the standard direct labor cost for the 500 tax returns based on the budgeted direct labor hours and the standard cost per hour:

Budgeted direct labor hours = 500 returns x 2 hours per return = 1,000 hours

Standard direct labor cost = Budgeted direct labor hours x Standard cost per hour = 1,000 hours x $32 per hour = $32,000

Next, we can calculate the actual direct labor cost for the 500 tax returns based on the actual direct labor hours and the actual cost per hour:

Actual direct labor cost = Actual direct labor hours x Actual cost per hour = 1,000 hours x $36 per hour = $36,000

Finally, we can calculate the direct labor cost variance as the difference between the actual direct labor cost and the standard direct labor cost:

Direct labor cost variance = Actual direct labor cost - Standard direct labor cost = $36,000 - $32,000 = $4,000 U

Therefore, the correct answer is C) $4,000 U.

Accurate Tax Returns Budgets Two Direct Labor Hours for Every