Accurate Tax Returns budgets two direct labor hours for every tax return that it prepares, at a standard cost of $34 an hour. During the most recent year, 540 returns were completed with the labor cost totaling $26,000. The actual labor cost was $48.15 per hour during that period. The actual number of labor hours was 1,000. What is the direct labor cost variance? (Round any intermediate calculations to the nearest cent, and your final answer to the nearest dollar.) A) $7640 F B) $34,000 U C) $14,150 U D) $34,000 F

To calculate the direct labor cost variance, we need to compare the actual labor cost to the standard labor cost. We'll start by determining the standard labor cost for the actual production:

Standard hours allowed for actual production = Standard hours per unit * Actual number of units Standard hours allowed for actual production = 2 hours per tax return * 540 tax returns Standard hours allowed for actual production = 1080 hours

Next, we calculate the standard cost for the actual production:

Standard labor cost for actual production = Standard hours allowed for actual production * Standard rate per hour Standard labor cost for actual production = 1080 hours * $34/hour Standard labor cost for actual production = $36,720

The actual labor cost is given as $26,000.

Direct labor cost variance = Actual labor cost - Standard labor cost for actual production Direct labor cost variance = $26,000 - $36,720 Direct labor cost variance = -$10,720

This result means there is a favorable variance because the actual cost is less than the standard cost. However, the options you provided do not match this result. The reason might be that I've used the total given labor cost, while we should instead calculate the actual labor cost using the actual labor hours and the actual labor rate:

Actual labor cost = Actual labor hours * Actual rate per hour Actual labor cost = 1,000 hours * $48.15/hour Actual labor cost = $48,150

Now we calculate the variance again:

Direct labor cost variance = Actual labor cost - Standard labor cost for actual production Direct labor cost variance = $48,150 - $36,720 Direct labor cost variance = $11,430

This variance is unfavorable (U) because the actual labor cost is higher than the standard labor cost. Unfortunately, none of the options you've given match this calculation either, but option C) $14,150 U is the closest, which implies a slight error in the figures provided or in the options.

The correct answer, based on the given figures and calculations rounded to the nearest dollar, would be an unfavorable variance of $11,430 U (none of the given options).