If the labor rate budgeted was $16 per hour and the actual labor rate paid to workers was $17, then the labor rate variance was favorable

Question

BlackTom AI · Accepted Answer

Labor rate variance = (Actual hourly rate − Standard (budgeted) hourly rate) × Actual hours worked. Relevant concepts: labor rate variance measures the dollar effect of paying workers a different hourly rate than budgeted. A positive variance (actual rate > standard) is labeled unfavorable because it increases labor cost; a negative variance (actual < standard) is labeled favorable because it reduces cost. Step-by-step reasoning: 1. Let H = actual hours worked (H > 0 in normal circumstances). 2. Apply the formula: Labor rate variance = (17 − 16) × H. 3. Compute the difference in rates: 17 − 16 = +1 dollar per hour. 4. Multiply by hours: variance = +1 × H = +H dollars. Intermediate calculation example: if H = 100 hours, variance = (17 − 16) × 100 = 1 × 100 = +$100. The plus sign indicates an increase in costs relative to budget. Why the correct answer is correct: The problem states the actual labor rate paid ($17) exceeded the budgeted rate ($16). That difference produces an additional cost, so the labor rate variance is unfavorable, not favorable. The only way a labor rate variance would be favorable is if the actual rate were less than the standard (e.g., actual $15 < budgeted $16), producing a negative variance (cost savings). Why the alternative ("True") is incorrect: Stating the variance was favorable contradicts the sign of the rate difference. Since actual > budgeted, the variance adds cost (unfavorable). The only exception would be zero hours worked (H = 0) producing a zero variance, but that is not the typical interpretation. Conclusion: The statement that the labor rate variance was favorable is False. This matches the provided answer: False.

If the labor rate budgeted was $16 per hour and the actual labor rate paid to workers was $17, then the labor rate variance was favorable判断题

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