Question

Milar Corporation makes a product with the following standard costs: Standard Quantity or Hours Standard Price or Rate Direct materials 4.0 pounds $ 3.50 per pound Direct labor 0.8 hours $ 20.00 per hour Variable overhead 0.8 hours $ 9.00 per hour In January the company produced 3,310 units using 13,240 pounds of the direct material and 2,768 direct labor-hours. During the month, the company purchased 14,000 pounds of the direct material at a cost of $35,100. The actual direct labor cost was $54,960 and the actual variable overhead cost was $23,860. 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

Direct labor rate variance= $415.2 favorable

Step-by-step explanation:

Giving the following information:

Direct labor 0.8 hours $ 20.00 per hour

In January the company produced 3,310 units using 2,768 direct labor hours.

The actual direct labor cost was $54,960

To calculate the direct labor rate variance, we need to use the following formula:

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

Actual rate= 54,960 / 2,768= $19.85

Direct labor rate variance= (20 - 19.85)*2,768

Direct labor rate variance= $415.2 favorable