Abba Company produces sails for boats. The Houston plant uses a standard costing

Question

Abba Company produces sails for boats. The Houston plant uses a standard costing system with the following standards for materials (cloth) and direct labor.

There are no beginning or ending inventories for direct materials.

For direct labor, what is the rate variance?

Standards     Cloth (Direct Materials)         Standard Price $ 2.17     Direct Labor         Standard Rate $ 12.15 December Data     Number of Sails Produced 39,464     Cloth (Direct Materials)         Actual Price $ 4.71         Actual Usage 110,442 square yards         Standard Quantity Allowed (given production) 88,898 square yards     Direct Labor         Actual Rate $ 9.86         Actual Usage 20,930 hours         Standard Quantity Allowed (given production) 17,342 hours

Explanation / Answer

Direct Labor Rate Variance = (Standard Rate - Actual Rate) x Actual Hours                                                        = [12.15 - 9.86] x 20930                                                              = 47929.70 Fav

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