Your Corporation makes a product with the following standard costs: INPUTS STAND
ID: 2527796 • Letter: Y
Question
Your Corporation makes a product with the following standard costs:
INPUTS
STANDARD QUANTITY OR HOURS
STANDARD PRICE OR RATE
Direct Materials
5.3 kilos
$ 6.00 per kilo
Direct labor
0.5 hours
$10.00 per hour
Variable Overhead
0.5 hours
$ 4.00 per hour
The company reported the following results concerning this product in August:
Actual output
2,100 units
Raw materials used in production
10,850 kilos
Purchases of raw materials
11,800 kilos
Actual direct labor-hours
1,100 hours
Actual cost of raw materials purchases
$ 73,160
Actual direct labor cost
$ 10,560
Actual variable overhead cost
$ 4,510
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 August is:
INPUTS
STANDARD QUANTITY OR HOURS
STANDARD PRICE OR RATE
Direct Materials
5.3 kilos
$ 6.00 per kilo
Direct labor
0.5 hours
$10.00 per hour
Variable Overhead
0.5 hours
$ 4.00 per hour
Explanation / Answer
Answer:
The labor rate variance for August is: =440 favorable
Working notes for the above answer:
labor rate variance formula
=(Actual Hour x Actual Rate ) - (Actual Hour x Standered Rate)
Actual Rate
=10560/1100
=$9.6 per hour
Now we will find labor rate variance as under
labor rate variance formula
=(Actual Hour x Actual Rate ) - (Actual Hour x Standered Rate)
=(1100 x 9.6 ) - (1100 x 10)
=10560 x 11000
=440 favorable
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.