Holiday Chemical Corporation uses a standard cost system to collect costs related to the production of its "bowling ball" fruitcakes. The direct labor standard for each fruitcake is 1.25 hours at a standard cost of $11.00 per hour. During the month of November, Holiday's fruitcake production used 9,820 direct labor-hours at a total direct labor cost of $106,547. This resulted in production of 8,500 fruitcakes for November. What is Holiday's labor rate variance for November?
A)$8,855 Favorable
B)$1,473 Favorable
C)$13,047 Unfavorable
D)$14,520 Unfavorable

Question

Quizplus · Accepted Answer

The labor rate variance is calculated as (Actual Hours x Actual Rate) - (Actual Hours x Standard Rate). The actual rate is $106,547 / 9,820 hours = $10.85 per hour. The standard rate is $11.00 per hour. The variance is (9,820 x $10.85) - (9,820 x $11.00) = $106,547 - $108,020 = $1,473 Favorable.

Holiday Chemical Corporation Uses a Standard Cost System to Collect