Milar Corporation makes a product with the following standard costs: In January
ID: 2535790 • Letter: M
Question
Milar Corporation makes a product with the following standard costs:
In January the company produced 2,000 units using 16,060 pounds of the direct material and 210 direct labor-hours. During the month, the company purchased 16,900 pounds of the direct material at a cost of $65,910. The actual direct labor cost was $4,473 and the actual variable overhead cost was $756.
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:
$260 U
$273 U
$260 F
Standard Quantity or Hours Standard Price or Rate Direct materials 7.7 pounds $ 4.00 per pound Direct labor 0.1 hours $ 20.00 per hour Variable overhead 0.1 hours $ 4.00 per hour Milar Corporation makes a product with the following standard costs: Standard Quantity Standard Price Direct materi Direct labor Variable overhead or Hours 7.7 pounds 0.1 hours 0.1 hours Rate $ 4.00 per pound $20.00 per hour 4.00 per hour als In January the company produced 2,000 units using 16,060 pounds of the direct material and 210 direct labor-hours. During the month, the company purchased 16,900 pounds of the direct material at a cost of $65,910. The actual direct labor cost was $4,473 and the actual variable overhead cost was $756 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 $260 U $273 U $260 F 273 FExplanation / Answer
B.$273U
direct labour rate variance = actual hour *(standard rate - actual rate).
here,
actual hours = 210.
standard rate = $20.00 per hour.
actual rate = actual direct labour cost / actual hours
=>$4,473 / 210
=>$21.30.
now,
direct labour rate variance = 210*($20.00-$21.30)
=>$273 U.
since standard rate is less than actual rate we have unfavorable variance.