Question

The following data are given for Harry Company: Budgeted production 26,000 units Actual production 27,500 units Materials: Standard price per ounce $6.50 Standard ounces per completed unit 8 Actual ounces purchased and used in production 228,000 Actual price paid for materials $1,504,800 Labor: Standard hourly labor rate $22.00 per hour Standard hours allowed per completed unit 6.6 Actual labor hours worked 183,000 Actual total labor costs $4,020,000 Overhead: Actual and budgeted fixed overhead $1,029,600 Standard variable overhead rate $24.50 per standard labor hour Actual variable overhead costs $4,520,000 ​ Overhead is applied on standard labor hours. (Round interim calculations to the nearest cent.) The direct labor rate variance is

Answer 1

$6,000 Favorable

Step-by-step explanation:

The labor rate variance can be calculated by using the following formula:

Labor Rate Variance = (Standard Rate - Actual Rate) * Actual Labor Hours

Here

Standard rate is $22 per hour

Actual Rate = Actual Labor Cost / Actual Hours

= $4020000 / 183000 Hrs = $21.97 per hour

Actual Labor Hours are 183,000 Hrs

Now by putting values in the above equation:

Labor Rate Variance = ($22 per hour - $21.97 per hour) * 183,000 Hrs

= $6,000

As the actual labor rate paid is lower than the standard labor rate, hence the above result is Favorable.