Question 6 (2 points) Arctic Enterprises, Inc. freezes water into ice. The stand

Question

Question 6 (2 points) Arctic Enterprises, Inc. freezes water into ice. The standard and actual costs for direct labor for the manufacture of 2,000 tons of ice are: Standard costs 400 hours at $20.00 405 hours at $19.80 Direct labor Which is true of the direct labor time and direct labor rate variances? O The direct labor time variance is unfavorable; the direct labor rate variance is favorable. O Both are favorable. O The direct labor time variance is favorable; the direct labor rate variance is unfavorable. O Both are unfavorable Save Question 7 (2 points) Preview

Explanation / Answer

Direct Labor Time Variance = (Standerd Hour * Standerd Rate) - (Actual Hour - Standerd Rate)

= (400 * $20) - (405 * $20)

= $8000 - $8100

= $100 Unfavorable

Direct Labor Rate Variance = Actual hours * (Actual Rate - Standerd Rate)

= 405 Hours * ($19.80 - $20)

= $81 Favorable, (Because Actual Rate less than Standerd Rate)

The Answer is "A" .

A. The Direct Labor Time Variance is Unfavorable; The Direct Labor Rate Variance is Favorable.

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