Gilder Corporation makes a product with the following standard costs: Standard Q

Question

Gilder Corporation makes a product with the following standard costs: Standard Quantity or Hours Standard Price or Rate Standard Cost Per Unit Direct materials 8.60 grams $8.00 per gram $68.80 Direct labor 0.3 hours $17.00 per hour $5.10 Variable overhead 0.3 hours $8.00 per hour $2.40 The company reported the following results concerning this product in June. Originally budgeted output 5,600 units Actual output 5,700 units Raw materials used in production 40,200 grams Purchases of raw materials 46,100 grams Actual direct labor-hours 590 hours Actual cost of raw materials purchases $261,690 Actual direct labor cost $8,053 Actual variable overhead cost $3,014 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 June is: $1,994 F $1,977 F $1,994 U $1,977 U

Explanation / Answer

Answer:

Labor Rate Variance :

= (Standard rate per hour - Actual rate per hour) * Actual Direct Labor hours used

= (17 - 13.65) * 590

= $1,976.5 or $1,977 F

Answer: B) $1,977 F

Note : Actual rate per hour = Actual Labor Cost / Actual Direct labor hours = 8,053 / 590 = $13.65

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