A Job Was Budgeted to Require 3 Hours of Labor

question 176

Multiple Choice

A job was budgeted to require 3 hours of labor per unit at $8.00 per hour. The job consisted of 8,000 units and was completed in 22,000 hours at a total labor cost of $198,000. What is the direct labor rate variance?

• A) $22,000 unfavorable.
• B) $22,000 favorable.
• C) $16,000 unfavorable.
• D) $16,000 favorable.
• E) $6,000 unfavorable.

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Definitions:

Activity-Based Costing

Activity-based costing is a method in accounting that assigns costs to products and services based on the resources they consume and the activities undertaken to produce them.

Period Costs

Expenses that are incurred by a business during a specific time period but are not directly tied to the production of goods and are reported immediately in the company's income statement.

Factory Overhead Allocation

The process of distributing indirect manufacturing costs, such as utilities and rent, across various products based on a predetermined rate or method.

Service Companies

Businesses that provide services to consumers or other businesses rather than producing goods.