Question

Use the following data for questions 25 thru 31:

Cox Engineering performs cement core tests in its laboratory. The following standards have been set for each core test performed based on planned activity of 1,800 core tests:

(Standard Hours or Quantity = SH/Q, Standard Price or Rate = SP/R, Price Per Unit = PP/U).

Direct Materials: SH/Q = 3 pounds, SP/R = $0.75 per pound, PP/U = $2.25
Direct Labor: SH/Q = 0.4 hours, SP/R = $12 per hour, PP/U = $4.80
Variable Manufacturing Overhead: SH/Q = 0.4 hours, SP/R = $9 per hour, PP/U = $3.60
Fixed Manufacturing Overhead: SP/R = $6,800

During March, the laboratory performed 2,000 core tests. On March 1 no direct materials (sand) were on hand. Variable manufacturing overhead is assigned to core tests on the basis of standard direct labor-hours. The following events occurred during March:

• 7,200 pounds of sand were purchased at a cost of $6,120.
• 7,200 pounds of sand were used for core tests.
• 840 actual direct labor-hours were worked at a cost of $8,610.
• Actual variable manufacturing overhead incurred was $7,240.
• Actual fixed manufacturing overhead incurred was $6,500.

The labor rate variance for March is:
A. $4,578 unfavorable
B. $1,470 unfavorable
C. $4,578 favorable
D. $1,470 favorable

Answer 1

The labor rate variance for March is $9,840 unfavorable.

Step-by-step explanation:

The labor rate variance for March can be calculated using the formula:

Labor Rate Variance = (Actual Hours - Standard Hours) x Standard Rate

Given that the actual number of direct labor-hours in March was 840 and the standard rate is $12 per hour, the labor rate variance can be calculated as follows:

Labor Rate Variance = (840 - 1,800) x $12 = -$9,840

Therefore, the labor rate variance for March is $9,840 unfavorable, and the correct option is A. $4,578 unfavorable.

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