Question

Dreidell Corporation expected to use 4.5 direct labor hours to produce one unit of their product,...

Dreidell Corporation expected to use 4.5 direct labor hours to produce one unit of their product, at a rate of $14.5/DLH. Actual results for last year indicate that they sold 5,000 units, where their direct labor workforce actually worked 6,000 hours at a rate of $14.25/DLH. What is the Direct Labor Rate Variance?

A. $1,250 favorable

B. $1,500 unfavorable

C. $1,500 favorable

D. $1,250 unfavorabl

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Homework Answers

Answer #1

Answer: option C

Explanation:

Direct labour rate varience is the measure of difference between actual cost of direct labour and standard cost of direct labour utilised during a period.

Formula for calculating direct labour rate varience:

Actual cost - standard cost of the actual hours

Actual cost = actual hours* actual rate

Standard cost of the actual hours= actual hours* standard rate

If the actual cost is more than standard cost then the varience is unfavorable.

If the actual cost is Less than the standard cost then the varience is favourable.

In the above question,

Actual hours= 6000 hours

Actual rate= 14.25

Standard rate= 14.5

Direct labour rate varience= (6000*14.25) - (6000*14.5)

= 85500 - 87000 = 1500 favourable.

SUMMARY

Direct labour rate varience= 1500 favourable

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