How is a labor rate variance computed? The difference between standard and actua

Question

How is a labor rate variance computed? The difference between standard and actual rate multiplied by actual hours. The difference between standard and actual rate multiplied by standard hours. The difference between standard and actual hours multiplied by actual rate. The difference between standard and actual hours multiplied by standard rate. None of these. Which of the following decisions would necessarily result in an increase in profit or decrease in loss? Eliminating the sale of all products that are priced below variable cost. Eliminating the sale of all products that are priced below absorption cost. Eliminating the sale of all products if the firm has a loss. Not eliminating the sale of any products if the firm is profitable overall. None of these.

Explanation / Answer

1. The formual for LAbor rate variance is :

So Option A is correct.

2. I case of products that are priced below variable cost , the contribution margin is negative , so more we produce such products, more we lose. Therefore to reduce loss or to increase profit the company should eliminate the sale of all products that are priced below variable cost.

So option A is correct.

Direct Labor Rate Variance= Actual Hrs Used( Actual Rate-Std Rate)

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