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 8 pounds at \$1.10 per pound = \$ 8.80 Direct labor 0.50 hour at \$8.00 per hour = \$ 4.00 Manufacturing overhead 0.50 hour at \$4.30 per hour = \$ 2.15

During the latest month, the company purchased and used 76,000 pounds of direct materials at a price of \$1.2 per pound to produce 10,000 units of output. Direct labor costs for the month totaled \$37,268 based on 4,840 direct labor hours worked. Variable manufacturing overhead costs incurred totaled \$18,500 and fixed manufacturing overhead incurred was \$10,000. Based on this information, the direct labor rate variance for the month was:

Multiple Choice

\$1,280 favorable

\$2,732 favorable

\$1,452 favorable

\$2,732 unfavorable

\$1,280 unfavorable

\$1,452 favorable

Working:

 Direct Labor rate variance = (Standard labor rate-Actual labor rate)*Actual Labor hours = (8.00-7.70)*4840 = \$         1,452 Favorable Working: Standard Labor rate = \$            8.00 per hour Actual Labor rate = \$       37,268 / 4840 = \$       7.70 Actual Labor hours = 4840 hours