Question

A job was budgeted to require 7 hours of labor per unit at $9.00 per hour. The job consisted of 8,900 units and was completed in 61,300 hours at a total labor cost of $563,500. What is the total labor cost variance?

Multiple Choice

• $400 unfavorable.

• $8,900 unfavorable.

• $2,800 unfavorable.

• $6,856 unfavorable.

• $9,656 unfavorable.

Answer 1

Standard rate = $9.00 per hour

Standard time = 7 hours of labor per unit

Actual output = 8,900 units

Standard time for actual output = Standard time x Actual output

= 7 x 8,900

= 62,300 hours

Actual total labor cost = $563,500

Actual time = 61,300 hours

Actual rate = Actual total labor cost/Actual time

= 563,500/ 61,300

= $9.1924959217

Direct labor cost variance = (Standard rate x Standard time for actual output) – (Actual rate x Actual time)

= (9 x 62,300) - (9.1924959217 x 61,300)

= 560,700 - 563,500

= $2,800 unfavorable

Third option is correct.