Question

N 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 16,900 pounds of the direct material at a cost of $14,640. 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:

Answer 1

the labor rate variance is $416 favorable

Step-by-step explanation:

The computation of the labor rate variance is shown below:

But before that actual labor rate is

The Actual labor rate is

= Actual direct labor cost ÷ Actual labor hours

= $103,840 ÷ 2,896

= $35.856354

Now

labor rate variance is

= (Standard rate - Actual rate) × Actual Hours

= ($36 - $35.856354) × 2,896

= $416 Favorable

Hence, the labor rate variance is $416 favorable