Milar Corporation makes a product with the following standard costs: In January
ID: 2535360 • Letter: M
Question
Milar Corporation makes a product with the following standard costs:
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 14,680 pounds of the direct material at a cost of $35,100. 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:
Standard Quantity or Hours Standard Price orRate Direct materials 12.5 pounds $ 12.00 per pound Direct labor 0.8 hours $ 37.00 per hour Variable overhead 0.8 hours $ 17.50 per hour
Explanation / Answer
Labour rate variance = (Standard rate-actual rate)actual hours
= (37*2904-107031)
Labour rate variance = 417 favorable