Milar Corporation makes a product with the following standard costs: Standard Quantity or Hours Standard Price or Rate Direct materials 12.0 pounds $ 11.50 per pound Direct labor 0.8 hours $ 36.00 per hour Variable overhead 0.8 hours $ 17.00 per hour In January the company produced 3,470 units using 13,880 pounds of the direct material and 2,896 direct labor-hours. During the month, the company purchased 14,640 pounds of the direct material at a cost of $35,100. The actual direct labor cost was $103,840 and the actual variable overhead cost was $47,220. 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:

Question

Business

Larry Yu

5 November, 17:38

Milar Corporation makes a product with the following standard costs: Standard Quantity or Hours Standard Price or Rate Direct materials 12.0 pounds $ 11.50 per pound Direct labor 0.8 hours $ 36.00 per hour Variable overhead 0.8 hours $ 17.00 per hour In January the company produced 3,470 units using 13,880 pounds of the direct material and 2,896 direct labor-hours. During the month, the company purchased 14,640 pounds of the direct material at a cost of $35,100. The actual direct labor cost was $103,840 and the actual variable overhead cost was $47,220. 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:

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Amaris Romero · Answer 1

Direct labor rate variance = $405.44 favorable

Explanation:

Giving the following information:

Standard Hours 0.8 hours for $36.00 per hour

In January the company produced 3,470 units using 2,896 direct labor-hours.

The actual direct labor cost was $103,840.

To calculate the direct labor rate variance, we need to use the following formula:

Direct labor rate variance = (Standard Rate - Actual Rate) * Actual Quantity

Actual rate = 103,840/2,896 = $35.86

Direct labor rate variance = (36 - 35.86) * 2,896

Direct labor rate variance = $405.44 favorable