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When auto manufacturer BMW purchased the Rolls-Royce brand name, BMW had to hire and train a new staff of assembly workers. The new workers were paid $27 per hour, worked a total of 7000 hours, and produced 2100 cars. BMW budgeted for a standard labor rate of $28.50 per hour and 3.50 direct labor hours per car. What is the direct labor rate variance for the Rolls-Royce division

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thaovtp1407

Answer:

10,500 favorable

Explanation:

Given that:

  • Actual number of hours: 7000  
  • Standard rate: $28.50
  • Actual rate: $27

The formula to compute the labor rate variance is shown below:

= Actual hours×  (Standard rate - Actual rate)

= 7000($28.50 -  $27)

= 10,500 favorable

Hope it will find you well.

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