Answer (A) is correct . When the actual direct labor rate is unknown, the total direct labor payroll can be found by multiplying the actual hours by the standard rate, then subtracting the favorable labor variance. (32,000 × $5.04) – $6,720 = $154,560
Answer (B) is incorrect because The total $6,720 DL rate variance, not the DL rate variance per standard hour times the actual DL hours, should be subtracted in the calculation.
Answer (C) is incorrect because The total $6,720 DL rate variance, not the DL rate variance per standard hour times the actual DL hours, should be used in calculating the payroll. Furthermore, a favorable DL rate variance should be subtracted from, not added to, the standard DL costs allowed for hours worked.
Answer (D) is incorrect because The $6,720 DL rate variance is favorable, and should therefore be subtracted from, not added to, the standard payroll for the hours worked.
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Compute Daniel’s total direct labor payroll for the month of June.
