Labor Rate Variance Question Accounting

Question

For the prior month, Ardono Company reported the following :

Production: Planned : 12,000 units Actual : 11,500 units

Direct Labor Rate : Standard : $15.50 per direct labor hour Actual : $15.45 per direct labor hour

Standard Direct Labor Hours per unit : 6

Labor Efficiency Variance : $2,170 Favorable

 

Question : Given this information, the Labor Rate Variance would have been :

 

A) $3,443 Favorable B) $3,443 Unfavorable C) $3,457 Favorable D) $3,457 Unfavorable E) None of the Above

 

Answer was A) but I need help with steps as to how.

 

Thanks.

 

 

Answer 1

first find the actual hours by using the labor efficiency variance given to solve for actual hours A:

 

 

labor efficiency variance  

(std hours  69000 - actual hours A) x std rate 15.50 - 2170F

                                                               15.50   15.50

 

69000 - A = 140

 

A = 68860 = actual hours

 

then plug into the labor rate variance

(std rate 15.50 - actual rate 15.45) actual hours 68860 = 3443F 

its favorable because you used less hours than planned.