**Title: Understanding Direct Labor Rate Variance****Introduction:**In this example, we examine Flapjack Corporation's direct labor rate variance calculation. Understanding this concept is crucial for cost accounting and managerial decision-making.**Scenario Details:**- Flapjack Corporation recorded 7,704 actual direct labor hours.- The actual rate was $12.30 per hour.- The budgeted production was for 1,100 units; however, only 957 units were produced.- The labor standard was set at 7.8 hours per unit with a standard rate of $13.05 per hour.**Question:**Determine the direct labor rate variance from the following options:- A. $5,778.00 unfavorable- B. $5,778.00 favorable- C. $3,523.81 unfavorable- D. $3,523.81 favorable**Explanation of Options:**To solve this, we need to apply the direct labor rate variance formula:\[ \text{Direct Labor Rate Variance} = (\text{Actual Hours} \times \text{Actual Rate}) - (\text{Actual Hours} \times \text{Standard Rate}) \]**Calculation:**1. Calculate the total cost at the actual rate: \[ 7,704 \text{ hours} \times $12.30/\text{hour} = $94,759.20 \]2. Calculate the total cost at the standard rate: \[ 7,704 \text{ hours} \times $13.05/\text{hour} = $100,538.20 \]3. Determine the variance: \[ \text{Rate Variance} = $94,759.20 - $100,538.20 = -$5,778.00 \] Since the result is negative, it indicates an **unfavorable variance**.Thus, the correct answer is:- **Option A. $5,778.00 unfavorable**Understanding the direct labor rate variance helps in managing and controlling labor costs effectively, ensuring the firm adheres to its budgeting plans.

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Description: **Title: Understanding Direct Labor Rate Variance****Introduction:**In this example, we examine Flapjack Corporation's direct labor rate variance calculation. Understanding this concept is crucial for cost accounting and managerial decision-making.*

The gap between actual and expected labor expenses is referred to as the labor rate variance. A…

Business

Accounting

Flapjack Corporation had 7,704 actual direct labor hours at an actual rate of $12.30 per hour. Original production had been budgeted for 1,100 units, but only 957 units were actually produced. Labor standards were 7.8 hours per completed unit at a standard rate of $13.05 per hour. The direct labor rate variance is a. $5,778.00 unfavorable O b. $5,778.00 favorable Oc. $3,523.81 unfavorable Od. $3,523.81 favorable

Flapjack Corporation had 7,704 actual direct labor hours at an actual rate of $12.30 per hour. Original production had been budgeted for 1,100 units, but only 957 units were actually produced. Labor standards were 7.8 hours per completed unit at a standard rate of $13.05 per hour. The direct labor rate variance is a. $5,778.00 unfavorable O b. $5,778.00 favorable Oc. $3,523.81 unfavorable Od. $3,523.81 favorable

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The standard costs and actual costs for factory overhead for the manufacture of 2,500 units of actual production are as follows: Standard Costs 3 hours per unit at $0.71 per hour 3 hours per unit at $1.92 per hour Fixed overhead (based on 10,000 hours) Variable overhead Actual Costs Total variable cost, $18,200 Total fixed cost, $8,100 The variable factory overhead controllable variance is Oa. $3,800 unfavorable Ob. $3,800 favorable Oc. $3,040 favorable Od. So