Question

# Thorson Corp makes a product with the following standard costs: Standard Quantity or Hours Standard Price...

Thorson Corp makes a product with the following standard costs:

 Standard Quantity or Hours Standard Price or Rate Standard Cost Per Unit Direct materials 6.5 ounces \$ 2.00 per ounce \$ 13.00 Direct labor 0.2 hours \$ 23.00 per hour \$ 4.60 Variable overhead 0.2 hours \$ 6.00 per hour \$ 1.20

The company reported the following results concerning this product in June.

 Originally budgeted output 2,700 units Actual output 2,800 units Raw materials used in production 19,380 ounces Purchases of raw materials 21,400 ounces Actual direct labor-hours 500 hours Actual cost of raw materials purchases \$ 40,660 Actual direct labor cost \$ 12,050 Actual variable overhead cost \$ 3,100

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:

\$616 F

\$550 F

\$550 U

\$616 U

The labor rate variance for June is: \$550 U

 Actual direct labor hours used 500.00 a Standard direct labor cost per hour \$          23.00 b Standard direct labor cost of actual direct labor hours used \$ 11,500.00 c = a × b Actual direct labor hours used 500.00 d Actual direct labor cost per hour \$          24.10 e = f ÷ d Actual direct labor cost \$ 12,050.00 f Labor rate variance \$     (550.00) c - f
• The standard rate for labor is \$23.
• The firm has paid \$24.10 per hour
• The firm has paid \$1.10 in excess of the standard rate.
• Labor rate variance = \$1.10 * 500 hours = \$550