Assume the following information appears in the standard cost card for a company that makes only one product: Standar Quantity or Hours Standar Price or Rate Standard CostDirect materials5pounds$ 11.00per pound$ 55.00Direct labor2hours$ 16.90per hour$ 33.80Variable manufacturing overhead2hours$ 3.00per hour$ 6.00During the most recent period, the following additional information was available:20,000 pounds of material was purchased at a cost of $10.50 per pound.All of the material that was purchased was used to produce 3,900 units.8,000 direct labor-hours were recorded at a total cost of $132,000.What is the direct labor rate variance?

Answered: Assume the following information…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Assume the following information appears in the standard cost card for a company that makes only one product:

	Standar Quantity or Hours		Standar Price or Rate		Standard Cost
Direct materials	5	pounds	$ 11.00	per pound	$ 55.00
Direct labor	2	hours	$ 16.90	per hour	$ 33.80
Variable manufacturing overhead	2	hours	$ 3.00	per hour	$ 6.00

During the most recent period, the following additional information was available:

20,000 pounds of material was purchased at a cost of $10.50 per pound.
All of the material that was purchased was used to produce 3,900 units.
8,000 direct labor-hours were recorded at a total cost of $132,000.

What is the direct labor rate variance?

Expert Solution

Step 1: Explanation of Direct Labor Rate Variance

The direct labor rate variance measures the difference between the actual hourly wage paid to workers and the standard hourly wage expected, indicating whether labor costs were higher or lower than anticipated during production.

A negative variance suggests that labor costs were lower than expected, while a positive variance indicates higher labor costs.

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