The standard direct labor cost to produce one pound of output for a company is presented below. Related data regarding the planned and actual production activities for the current month for the company are also given below.
(Note: DLH = Direct Labor Hours)
Direct Labor Standard: .40 DLH at $12.00 per DLH = $4.80
Planned production 15,000 pounds
Actual production 15,500 pounds
Actual direct labor costs (6,250 DLH) $75,250
$250 unfavorable derives from the actual direct labor hours (6,250) times the difference between the standard direct labor rate ($12.00) and the actual direct labor rate ($75,250 ÷ 6,250 = $12.04). Therefore, 6,250 × ($12.00 - $12.04) = $250.