Using the same direct labor data, what is the direct labor rate variance?

• A. $1,000 U
• B. $2,000 F
• C. $0
• D. $1,000 F

Answer: (A)

Direct labor rate variance shows how much more (or less) you paid per hour for direct labor than the standard rate, multiplied by the actual hours worked. An unfavorable variance means actual hourly pay was higher than planned.

In this case, the data yield a $1,000 unfavorable variance, meaning the actual rate exceeded the standard rate enough to generate a $1,000 shortfall. For illustration, paying $1 more per hour for 1,000 hours would create a $1,000 unfavorable variance, or paying $2 more per hour for 500 hours would do the same. The other options would require paying less than the standard rate (favorable) or no difference at all, which doesn’t align with the given data.