Question

The Davidson Corporation produces clocks. According to company​ standards, it should take 2 hours of direct labor to produce a clock.​ Davidson's standard labor cost is​ $19 per hour. During​ June, Thomas produced​ 6,200 stopwatches and used​ 13,500 hours of direct labor at a total cost of​ $260,000. What is​ Thomas' direct labor rate variance for​ June?

A. ​$1,607 unfavorable
B. ​$3,500 favorable
C. ​$1,607 favorable
D. ​$3,500 unfavorable

Answer 1

B. ​$3,500 favorable

Step-by-step explanation:

The direct labor cost variance here can be formulated as below:

Cost variance = Total standard direct labour cost- Total actual direct labor cost, or:

Cost variance = Standard labor cost per hour x number of hour - Total actual direct labor cost

Putting all the number together, we have:

Cost variance = 19 x 13,500 - 260,000 = -3,500. Negative sign indicate a favorable variance.

Note: We do not calculate standard labor cost based on number of clocked produced because this production volume only reflect productivity rather than resources used.