Question

The following data relate to product no. 338 of Voluntown Company: Direct labor standard: 6 hours...

The following data relate to product no. 338 of Voluntown Company:

Direct labor standard: 6 hours at \$15 per hour
Direct labor used in production: 51,000 hours at a cost of \$775,200
Manufacturing activity: 8,400 units completed

The direct-labor rate variance is:

Multiple Choice

• None of the answers is correct.

• \$10,200U.

• \$10,080U.

• \$10,080F.

 Cost standards for one unit of product no. C1895: Direct material 3 pounds at \$2.70 per pound \$ 8.10 Direct labor 7 hours at \$7.70 per hour 53.90 Actual results: Units produced 5,600 units Direct material purchased 26,200 pounds at \$2.90 \$ 75,980 Direct material used 16,500 pounds at \$2.90 47,850 Direct labor 40,300 hours at \$7.50 302,250

Assume that the company computes variances at the earliest point in time.

The direct-labor rate variance is:

Multiple Choice

• \$8,060U.

• \$7,804F.

• \$7,804F.

• None of the answers is correct.

• \$8,060F.

Question - (1)

Step - (1) - Information Given -

Direct labor standard = 6 hours at \$15 per hour.

Direct labor used in production = 51000 hours at a cost of \$775200.

Manufacturing activity =  8400 units completed.

.

Step - (2) - Calculation of Actual rate per hour -

= Production cost / No. of hours

= \$775200 / 51000 hours

= \$15.2

.

Step - (3) - Calculation of Direct-labor rate variance -

= (Actual hours * Actual rate) - (Actual hours * Standard rate)

= (51000 hours * \$15.2) - (51000 hours * \$15)

= 51000 hours * \$0.20

= \$10200U

Hence, Option - (B) is Correct.

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