Answer (D) is correct . The direct labor rate variance equals the actual hours worked times the difference between the standard and actual rates. When the standard rate exceeds the actual rate, the variance is favorable: AH × (SR – AR) = favorable rate variance 10,000 × (SR – $8.25) = $5,600 F SR – $8.25 = $.56 SR = $8.81
Answer (A) is incorrect because Treating the $.56 variance per unit as unfavorable and subtracting it from the AR of $8.25 results in $7.69.
Answer (B) is incorrect because Actual hours, not standard hours, are used to determine the SR. Furthermore, the favorable variance should be added, not subtracted, in calculating the standard rate.
Answer (C) is incorrect because The actual rate is $8.25.
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What was Lake’s standard direct labor rate in May?
