Problem: Snazzy Jeans, Inc. manufactures designer jeans. The company uses standard costing and has developed the following information about standards for its product.
Materials: 2 yards per unit; $10 per yard
Labor: 0.25 DL hour per unit; $11 per hour
During October, the company experienced an unanticipated spike in demand and increased production. Although planned production was for 8,000 units, the company actually produced 10,000 units. In anticipation of the original production volume, 18,000 yards were purchased, at a total cost of $175,000. During the month, 22,000 yards of material were used, and 2,400 direct labor hours were worked. Direct labor cost for the month totaled $27,000.
Compute the direct labor rate variance and specify if it is favorable or unfavorable.