Hassock Corporation produces woven wall hangings. It takes 2 hours of direct labor to produce a single wall hanging. Hassock’s standard labor cost is $14 per hour. During August, Hassock produced 8,000 units and used 16,140 hours of direct labor at a total cost of $222,960. What is Hassock’s labor rate variance for August?
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The labor rate variance is calculated as the difference between the actual labor cost and the standard labor cost, multiplied by the actual hours worked.
First, calculate the standard labor cost per hour: $14 per hour
Then, calculate the actual labor cost per hour: $222,960 / 16,140 hours = $13.80 per hour
The labor rate variance is then: ($14 - $13.80) * 16,140 hours = $3,228 favorable.
The variance is favorable because the actual labor cost per hour is less than the standard labor cost per hour.
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