Question

Smart Accountants Inc. (SMI) planned on completing 600 tax returns for the month of February. The...

Smart Accountants Inc. (SMI) planned on completing 600 tax returns for the month of February. The actual number of tax returns completed was 400 returns. SMI budgeted for 2 hours per tax return, at a rate of $21 per hour. Actual hours worked were 1,000 hours, at a rate of $25 per hour. What is SMI's direct labour rate variance?

Question 4 options:

$4,200 F

$4,200 U

$4,000 F

$4,000 U
Business   Accounting   
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Answer #1

Correct answer-----------$4,000 U

Working

Labor Rate Variance
( Standard Rate - Actual Rate ) x Actual Labor Hours
( $                  21.00 - $                      25.00 ) x 1000
-4000
Variance $                4,000.00 Unfavourable-U
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