Question

A company uses the following standard costs to produce a single unit of output. Direct materials 6 pounds at $0.90 per pound = $5.40 Direct labor 0.5 hour at $12.00 per hour = $6.00 Manufacturing overhead 0.5 hour at $4.80 per hour = $2.40 During the latest month, the company purchased and used 58,000 pounds of direct materials at a price of $1.00 per pound to produce 10,000 units of output. Direct labor costs for the month totaled $56,350 based on 4,900 direct labor hours worked. Variable manufacturing overhead costs incurred totaled $15,000 and fixed manufacturing overhead incurred was $10,400. Based on this information, the direct labor rate variance for the month was: A. $1,200 favorable B. $3,650 favorable C. $2,450 favorable D. $3,650 unfavorable

Answer 1

Standard rate = $12 per hour

Actual labor cost = $56,350

Actual time = 4,900 direct labor hour

Actual rate = Actual labor cost/Actual time

= 56,350/4,900

= $11.5 per direct labor hour

Direct labor rate variance = Actual time x (Standard rate - Actual rate)

= 4,900 x (12 - 11.5)

= 4,900 x 0.5

= $2,450 Favorable

Correct option is (C)

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