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 dа ta:

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.