Machine Builders Inc. adopted a standard cost system several years ago that it uses in conjunction with its process cost system. The per-unit standard costs for direct materials and direct labor for its single product are as follows:

Materials:(7 kilograms × $10 per kilogram)$70 Labor:(6 hours × $17 per hour)$102

All materials are issued at the beginning of processing. The operating data shown below were taken from the records for July:

In-process beginning inventory none In-process ending inventory—90% complete as to labor 1,300unitsUnits completed during the month 7,290unitsBudgeted output 8,100unitsPurchases of materials, in kilograms (AQ) 37,000 Total actual labor costs incurred$518,000 Direct labor hours worked (AQ) 28,000hoursMaterials purchase-price variance$2,600unfavorableIncrease in materials inventory in July 1,600kilogramsBeginning inventory of materials 0kg.

The direct labor flexible-budget variance for July, to the nearest dollar, was:

$344,920 favorable
1. This period's output, with respect to direct labor = units completed + equivalent units in ending WIP inventory = 7,290 units + (0.90 × 1,300 units) = 8,460 units

2. Standard allowed labor hours, based on output for the period, SQ = 8,460 units (see (1) above)) × 6 hours/unit (given) = 50,760 hours

3. Direct labor FB variance = actual direct labor cost ? FB for direct labor based on output = $518,000 (given) ? (50,760 hours (see (2) above) × $17/hour (given)) = $518,000 ? $862,920 = $344,920F (to the nearest dollar).
Note: the variance here is favorable (F) because the budget for direct labor cost, based on output achieved this period > actual direct labor cost incurred during the period.