Question

# A company uses the following standard costs to produce a single unit of output. Direct materials...

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

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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