The budget for May called for production of 9,000 units. Actual output for the m

Question

The budget for May called for production of 9,000 units. Actual output for the month was 8,500 units with total direct materials cost of $127,500 and total direct labor cost of $77,775. The direct labor standards call for 45 minutes of direct labor per unit at a cost of $12 per direct labor-hour. The direct materials standards call for one pound of direct materials per unit at a cost of $15 per pound. The actual direct labor-hours were 6,375. Variance analysis of the performance for the month of May would indicate:
$7,500 favorable materials quantity variance.
$1,275 favorable direct labor efficiency variance.
$1,275 unfavorable direct labor efficiency variance.
$1,275 unfavorable direct labor rate variance.
show work please

Explanation / Answer

6.375 hours times a standard of $12 per hour equals $76,500. Since $77,775 was actually spent on direct labor there was an unfavorable rate variance of $1,275.

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