Direct Labor Rate Variance Accounting Question

Question

Joseph Company requires 6 direct labor hours for each unit produced and pays $20 per hour. During the last month, the company produced 1,000 units of product and paid a total of $87,120 direct labor salary. The labor efficiency variance was $800 favorable. What was the direct labor rate variance?

A) $33,680 Favorable B) $32,080 Favorable C) $33,680 Unfavorable D) $32,080 Unfavorable E) Undeterminable

Answer was $32,080 Favorable but I need help with steps as to how.

Answer 1

Standard: 6h/u     Labor cost: $20/h     Production: 1,000u     Cost: $87,120     Efficiency variance: $800

 

direct labor variance = Budget - Actual - Efficiency variance

 

DLV = (6h/u x 1000u x $20/h) - $87,120 - $800 = $32,080

 

the answer is option B