Question

Mlar Corporation makes a product with the following standard costs: Direct materials Direct labor Variable overhead Standard Quantity or Hours 12.5 pounds 0.8 hours 0.8 hours Standard Price or Rate $12.00 per pound $37.00 per hour $17.50 per hour In January the company produced 3.480 units using 13,920 pounds of the direct material and 2,904 direct labor hours. During the month, the company purchased 16,900 pounds of the direct material at a cost of $14,680. The actual direct labor cost was $107,031 and the actual variable overhead cost was $48,748 The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased The labor rate variance for January is: 400

Answer 1

37.00 per hour 2,904 Direct labor hours Standard rate per hour Actual hours worked Actual rate per hour = Actual direct labor cost / Actual direct labor hours 36.86 ($ 107,031 / 2,904 DLHS) Labor rate variance = (Actual Rate - Standard Rate) Actual hours worked (417.00) Favourable Labour rate variance is favourable as the actual rate per hour is leser $ 36.86 as compared to standard rate per hour $ 37.00. Hence, labor rate varicance is unfavourable $ 417. Answer is option second - $ 417 F