Question

The following labor standards have been established for a particular product: Standard labor-hours per unit of output 9.3 hours Standard labor rate $ 16.90 per hour The following data pertain to operations concerning the product for the last month: Actual hours worked 9,900 hours Actual total labor cost $ 164,340 Actual output 980 units What is the labor rate variance for the month?

Answer 1

	labor rate variance
	(Actual rate - standard rate)*actual hrs
	(164,340 - 9900*16.90)
	2,970	F

Answer 2

Calculation:

1. Actual Labor Rate per Hour:

   $$\text{Actual Labor Rate}=\frac{\text{Actual Total Labor Cost}}{\text{Actual Hours Worked}}=\frac{\mathrm{\$}164,\text{\hspace{0.17em}⁣}340}{9,\text{\hspace{0.17em}⁣}900\text{ hours}}=\mathrm{\$}16.60\text{ per hour}$$

2. Labor Rate Variance:

   $$\text{Labor Rate Variance}=(\text{Standard Rate}-\text{Actual Rate})\times \text{Actual Hours Worked}$$$$=(\mathrm{\$}16.90-\mathrm{\$}16.60)\times 9,\text{\hspace{0.17em}⁣}900\text{ hours}$$$$=\mathrm{\$}0.30\times 9,\text{\hspace{0.17em}⁣}900=\mathrm{\$}2,\text{\hspace{0.17em}⁣}970\text{ (Favorable)}$$

The variance is favorable because the actual rate paid ($16.60) was lower than the standard rate ($16.90)

Answer:
The labor rate variance for the month is $2,970 (Favorable).