Newbill Enterprises recently used 33000 labor hours to produ

Newbill Enterprises recently used 33,000 labor hours to produce 12,100 completed units. According to manufacturing specifications, each unit is anticipated to take 2.65 hours to complete. The company\'s actual payroll cost amounted to $653,400. If the standard labor cost per hour is $20.20, Newbill\'s labor rate variance is:

a. $5,687U.

b. $13,000F.

c. $5,687F.

d. $13,200U.

e. $13,200F.

d. None of these.

Solution

labor rate variance = Actual Hours * ( Actual Rate- Standard Rate)

= 33,000 Hours * [ {$ 653,400 / 33,000} - $ 20.20]

= 13,200 Favorable

Since the Actual Rate is less than the Standard Rate, the Variance is Favorable.

Hence the correct answer is e. $13,200F