Asked by Jessica Slate on Jun 14, 2024
Verified
Wolery Incorporated has provided the following data concerning one of the products in its standard cost system. The company has reported the following actual results for the product for April:
The labor rate variance for the month is closest to:
A) $2,576 Unfavorable
B) $2,816 Unfavorable
C) $2,816 Favorable
D) $2,576 Favorable
Labor Rate Variance
The discrepancy between what labor actually costs and what was initially budgeted or considered as the standard labor cost.
Actual Results
The real outcomes or data obtained from an operation or process, often compared against planned or forecasted results.
Standard Cost System
A method of cost accounting that compares actual costs to predetermined standards, facilitating variance analysis to manage costs.
- Examine and determine variances in direct labor, paying attention to differences in rate and efficiency.
Verified Answer
Using the given information, we can calculate the actual rate:
Actual Cost / Actual Hours = $36,420 / 2,670 = $13.65/hr
The labor rate variance is:
2,670 x ($13.65 - $14.50) = -$2,280
Since this variance is unfavorable (negative), we need to flip the sign to get the absolute value: $2,280.
Therefore, the labor rate variance for the month is closest to option A, $2,576 Unfavorable.
Learning Objectives
- Examine and determine variances in direct labor, paying attention to differences in rate and efficiency.
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