n January the company produced 3,380 units using 13,520 pounds of the direct material and 2,824 direct labor-hours. During the month, the company purchased 14,280 pounds of the direct material at a cost of $35,100. The actual direct labor cost was $75,841 and the actual variable overhead cost was $33,828. 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: Multiple Choice $407 F $407 U $2,833 U $2,833 F

Question

Business

Kobe Mcbride

3 May, 06:08

n January the company produced 3,380 units using 13,520 pounds of the direct material and 2,824 direct labor-hours. During the month, the company purchased 14,280 pounds of the direct material at a cost of $35,100. The actual direct labor cost was $75,841 and the actual variable overhead cost was $33,828. 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: Multiple Choice $407 F $407 U $2,833 U $2,833 F

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Sylvia · Answer 1

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

Explanation:

Giving the following information:

Actual direct labor hours = 2,824

Actual direct labor cost = $75,841

Actual direct labor rate = 75,841/2,824 = $26.86

To calculate the direct labor rate variance, we need the standard cost information. I will provide the formula and an invented standard cost per hour to guide an answer.

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

Standard cost per direct labor hour = 30

Direct labor time (efficiency) variance = (30 - 26.86) * 2,824

Direct labor time (efficiency) variance = $8,867.36 favorable

It is favorable because the cost per hour was lower than estimated.