Question

Milar Corporation makes a product with the following standard costs:

	Standard Quantity or Hours			Standard Price or Rate
Direct materials		6.5	pounds	$	6.00	per pound
Direct labor		0.8	hours	$	25.00	per hour
Variable overhead		0.8	hours	$	11.50	per hour

In January the company produced 3,360 units using 13,440 pounds of the direct material and 2,808 direct labor-hours. During the month, the company purchased 14,200 pounds of the direct material at a cost of $35,100. The actual direct labor cost was $69,795 and the actual variable overhead cost was $30,940.

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 January is:

Answer 1

• Requirement asked: labor rate Variance = $ 405 Favourable

Labor Rate Variance
(	Standard Rate	-	Actual Rate = $ 69795 / 2808 DLhs	)	x	Actual Labor Hours
(	$                              25.00	-	$                    24.86	)	x	2808
	405
	Variance		$                  405.00			Favourable-F