Accurate Tax Returns budgets two direct labor hours for every tax return that it prepares, at a standard cost of $34 an hour. During the most recent year, 520 returns were completed with the labor cost totaling $18,000. The actual labor cost was $34.62 per hour during that period. The actual number of labor hours was 1,200.
1) What is the direct labor cost variance?
Select one:
A. $40,800 U
B. $320 F
C. $744 U
D. $40,800 F
E. None of the above

Option C is correct ($744 U)

Direct labor cost variance=$744 U

It is unfavorable because actual labor cost is more than the standard cost of labor.

Explanation:

Option C is correct ($744 U)

Given Data:

Standard cost=$34/hour

Actual labor cost= $34.62/hour

Actual number of labor hours=1200 hours

Required:

The direct labor cost variance=?

Solution:

Direct labor cost variance=(Actual labor cost-Standard cost)*Actual number of labor hours.

Direct labor cost variance=(34.62-34)*1200

Direct labor cost variance=$744 U

It is unfavorable because actual cost is more than the standard cost of labor.

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