Question

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

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:

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.

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