Shade Company adopted a standard cost system several years ago. The standard cos

Question

Shade Company adopted a standard cost system several years ago. The standard costs for direct labor and direct materials for its single product are as follows: Materials (6.60 kilograms × $15.00/kilogram) = $99.00/unit. Direct labor (4.60 hours × $26.00 per hour) = $119.60/unit. All materials were issued at the beginning of processing. The operating data shown below were taken from the records for December: In-process beginning inventory None In-process ending inventory - 110.00% complete as to labor 1,270 units Units completed during he period 8,980 units Budgeted output 9,520 Purchases of materials (in kilograms) 53,000 Total actual direct labor cost incurred $699,825 Direct labor hours worked (AQ) 34,620 hours Materials purchase-price variance $2,130 favorable Increase in materials inventory in December 2,059 kilograms The direct labor rate variance for December is: $200,295 unfavorable $340,969 unfavorable $541,264 favorable $340,969 favorable $200,295 favorable Shade Company adopted a standard cost system several years ago. The standard costs for direct labor and direct materials for its single product are as follows: Materials (6.60 kilograms × $15.00/kilogram) = $99.00/unit. Direct labor (4.60 hours × $26.00 per hour) = $119.60/unit. All materials were issued at the beginning of processing. The operating data shown below were taken from the records for December: In-process beginning inventory None In-process ending inventory - 110.00% complete as to labor 1,270 units Units completed during he period 8,980 units Budgeted output 9,520 Purchases of materials (in kilograms) 53,000 Total actual direct labor cost incurred $699,825 Direct labor hours worked (AQ) 34,620 hours Materials purchase-price variance $2,130 favorable Increase in materials inventory in December 2,059 kilograms The direct labor rate variance for December is: $200,295 unfavorable $340,969 unfavorable $541,264 favorable $340,969 favorable $200,295 favorable

Explanation / Answer

Total actual labor hours - 34620 hours

Actual rate - 699825 / 34620 = $20.2144

Labor rate variance = (Actual rate - Standard rate) x Actual quantity

= ($20.21 - $26) x 34,620 = $200,295 favorable

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