Question

Data on Goodman Company's direct-labor costs are given below:

Budgeted direct labor hours

30,000

Actual direct labor hours

29,000

Actual direct labor payroll

$110,200

Total direct labor payroll activity variance

$4,200F

Total direct labor payroll flexible variance

$11,600F

What was Goodman's budgeted direct labor rate?

Select one:

a. $3.40

b. $4.06

c. $4.20

d. Neither of the above

Answer 1

Solution:

As per the information given in the question,

Total direct labor payroll activity variance = 4,200F

We know that the Total direct labor payroll activity variance is calculated using the formula

Total direct labor payroll activity variance = ( Budgeted direct labor hours - Actual direct labor hours ) * Budgeted direct labor rate

Further as per the information given in the question we have

Budgeted direct labor hours = 30,000 ; Actual direct labor hours = 29,000 ;

Applying the above information we have

4,200 = ( 30,000 – 29,000 ) * Budgeted direct labor rate

4,200 = 1,000 * Budgeted direct labor rate

4,200 / 1,000 = Budgeted direct labor rate

Budgeted direct labor rate = 4,200 / 1,000

Budgeted direct labor rate = $ 4.20

Thus Goodman’s budgeted direct labor rate = $ 4.20

The solution is Option c. $ 4.20