Question

Doogan Corporation makes a product with the following standard costs: Standard Quantity or Hours Standard Price or Rate Direct materials 7.4 grams $ 2.00 per gram Direct labor 0.5 hours $ 20.00 per hour Variable overhead 0.5 hours $ 7.00 per hour The company produced 5,200 units in January using 39,310 grams of direct material and 2,380 direct labor-hours. During the month, the company purchased 44,400 grams of the direct material at $1.70 per gram. The actual direct labor rate was $19.30 per hour and the actual variable overhead rate was $6.80 per hour. 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= $1,666 favorable

Step-by-step explanation:

Giving the following information:

The company produced 5,200 units in January using 2,380 direct labor-hours.

The actual direct labor rate was $19.30 per hour

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

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

Direct labor rate variance= (20 - 19.3)*2,380

Direct labor rate variance= $1,666 favorable