Question

Tharaldson Corporation makes a product with the following standard costs:

	Standard Quantity or Hours			Standard Price or Rate			Standard Cost Per Unit
Direct materials		6.3	ounces	$	2.00	per ounce	$	12.60
Direct labor		0.4	hours	$	11.00	per hour	$	4.40
Variable overhead		0.4	hours	$	6.00	per hour	$	2.40

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

Originally budgeted output		3,300	units
Actual output		2,600	units
Raw materials used in production		19,500	ounces
Purchases of raw materials		22,400	ounces
Actual direct labor-hours		470	hours
Actual cost of raw materials purchases	$	42,000
Actual direct labor cost	$	13,300
Actual variable overhead cost	$	3,650

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:

Answer 1

Answer:

Labor Rate Variance = $ 8,130 Unfavorable

Calculations:

It is given that:

Standard Rate	$ 11.00
Standard hours	1,040	2600*0.4
Actual rate	$ 28.30
Actual hours	470

Now,

Labor Rate Variance =	(Standard Rate - Actual Rate) * Actual hours
Labor Rate Variance =	( $ 11 - $ 28.30) * 470
Labor Rate Variance =	$ (8,130) Unfavorable

In case of any doubt or clarification, feel free to come back via comments.