The Ticktock Corporation produces clocks. According to company standards, it should take 2 hours of direct labor to produce a clock. Ticktock's standard labor cost is $10 per hour. During June, Ticktock produced 5,600 stopwatches and used 14,000 hours of direct labor at a total cost of $266,000. What is Ticktock's direct labor rate variance for June?

Question

Macie Stephenson

Business

28 February, 14:21

The Ticktock Corporation produces clocks. According to company standards, it should take 2 hours of direct labor to produce a clock. Ticktock's standard labor cost is $10 per hour. During June, Ticktock produced 5,600 stopwatches and used 14,000 hours of direct labor at a total cost of $266,000. What is Ticktock's direct labor rate variance for June?

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Answers (1)

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Marcel · Answer 1

Direct labor rate variance = $126,000 unfavorable

Explanation:

Giving the following information:

Ticktock's standard labor cost is $10 per hour.

During June, Ticktock used 14,000 hours of direct labor at a total cost of $266,000.

To calculate the direct labor rate variance, we need to use the following formula:

Direct labor rate variance = (Standard Rate - Actual Rate) * Actual Quantity

Actual rate = 266,000/14,000 = 19

Direct labor rate variance = (10 - 19) * 14,000 = $126,000 unfavorable