Accurate Tax Returns budgets two direct labor hours for every tax return that it prepares, at a standard cost of $ 32 an hour. During the most recent year, 540 returns were completed with the labor cost totaling $ 26 comma 000. The actual labor cost was $ 48.15 per hour during that period. The actual number of labor hours was 1 comma 000. What is the direct labor cost variance?

Question

Business

Grady Hood

30 January, 14:12

Accurate Tax Returns budgets two direct labor hours for every tax return that it prepares, at a standard cost of $ 32 an hour. During the most recent year, 540 returns were completed with the labor cost totaling $ 26 comma 000. The actual labor cost was $ 48.15 per hour during that period. The actual number of labor hours was 1 comma 000. What is the direct labor cost variance?

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Adonis Ellison · Answer 1

Labor cost variance refers to the variance, which is determined by subtracting the actual direct labor cost from the standard direct labor cost associated with the product.

Explanation:

Given that:

Actual hours = 1,000

Actual rate = $48.15

Standard rate = $32 per hr.

Now,

Labor Cost variance = Actual hours * (Actual rate - Standard Rate)

Labor Cost variance = 1000 * (48.15 - 32)

Labor Cost variance = 1000 * 16.15

Labor Cost variance = 16,150