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Extreme Builders constructs houses. The standard labor rate is $25 per hour and the standard number of hours is 15,000 hours per home. During the year, it constructed 12 homes using 18,000 labor hours per home and a rate of $28 per hour. Calculate the Extreme Builders' labor rate variance. a.$648,000 F b.$540,000 F c.$648,000 U d.$540,000 U

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Answer:

Direct labor rate variance= $648,000 unfavorable

Explanation:

Giving the following information:

The standard labor rate is $25 per hour. During the year, it constructed 12 homes using 18,000 labor hours per home and a rate of $28 per hour.

To calculate the direct  labor rate variance, we need to use the following formula:

Direct labor rate variance= (Standard Rate - Actual Rate)*Actual Quantity

Direct labor rate variance= (25 - 28)*216,000

Direct labor rate variance= $648,000 unfavorable

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