Question

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:

Group of answer choices

$616 F

$550 F

$550 U

$616 U

Answer 1

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