Asked by Tishera Brooks on Jul 28, 2024
Verified
Milar Corporation makes a product with the following standard costs: In January the company produced 2,000 units using 16,060 pounds of the direct material and 210 direct labor-hours. During the month, the company purchased 16,900 pounds of the direct material at a cost of $65,910. The actual direct labor cost was $4,473 and the actual variable overhead cost was $756.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:
A) $260 Unfavorable
B) $273 Unfavorable
C) $260 Favorable
D) $273 Favorable
Direct Materials
Ingredients that are specifically identifiable in the creation of a certain product.
Direct Labor-Hours
The broad sum of hours dedicated by workers directly in the manufacturing workflow.
Variable Overhead
Indirect production costs that vary with the level of output, such as utilities for a manufacturing plant.
- Execute computations and investigate variances associated with direct labor's rate and efficiency aspects.
Verified Answer
Actual Labor Rate = Actual Labor Cost / Actual Hours
Actual Labor Rate = $4,473 / 210 hours
Actual Labor Rate = $21.30 per hour
Next, we need to calculate the standard labor rate per hour:
Standard Labor Rate = Standard Labor Cost / Standard Hours
Standard Labor Rate = $8.00 / 0.50 hours
Standard Labor Rate = $16.00 per hour
Finally, we can calculate the labor rate variance:
Labor Rate Variance = (Actual Hours x (Actual Labor Rate - Standard Labor Rate))
Labor Rate Variance = 210 hours x ($21.30 - $16.00)
Labor Rate Variance = 210 hours x $5.30
Labor Rate Variance = $1,113
Since the labor rate variance is unfavorable (the actual rate is higher than the standard rate), the answer is B) $273 Unfavorable.
Learning Objectives
- Execute computations and investigate variances associated with direct labor's rate and efficiency aspects.
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