A company predicted that it would manufacture 10,000 units of finished goods dur

Question

A company predicted that it would manufacture 10,000 units of finished goods during March. The direct labor standards indicated that each unit of finished goods requires 2.4 direct labor hours at a standard wage of $20 per hour, totaling $48.00 per finished good unit. During March, the company actually made 9,000 units of finished goods. Production used 2.5 labor hours per finished unit, and the company actually paid $21 per hour, totaling $52.50 per unit of finished product. What amount is the company’s direct labor rate variance for March? A. $18,000 B. $22,500 C. $40,500 D. $25,000 A company predicted that it would manufacture 10,000 units of finished goods during March. The direct labor standards indicated that each unit of finished goods requires 2.4 direct labor hours at a standard wage of $20 per hour, totaling $48.00 per finished good unit. During March, the company actually made 9,000 units of finished goods. Production used 2.5 labor hours per finished unit, and the company actually paid $21 per hour, totaling $52.50 per unit of finished product. What amount is the company’s direct labor rate variance for March? A. $18,000 B. $22,500 C. $40,500 D. $25,000

Explanation / Answer

Actual Hours = 2.5  labor hours per finished unit * 9,000 units of finished goods

= 22,500  labor hours

The direct labor rate variance = (Actual Hours * Actual Rate) - ( Actual Hours * Standard Rate)

= ( 22,500  labor hours * $ 21 per Hour) -  ( 22,500  labor hours * $ 20 per Hour)

= $ 22,500

The correct answer is B. $ 22,500

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