Hurren Corporation makes a product with the following standard costs: Standard Q

Question

Hurren Corporation makes a product with the following standard costs: Standard Quantity or Hours Standard Price or Rate Standard Cost Per Unit Direct materials 7.90 grams $2.00 per gram $15.80 Direct labor 0.4 hours $17.00 per hour $6.80 Variable overhead 0.4 hours $7.00 per hour $2.80 The company reported the following results concerning this product in June. Originally budgeted output 6,900 units Actual output 7,000 units Raw materials used in production 39,500 grams Purchases of raw materials 44,700 grams Actual direct labor-hours 520 hours Actual cost of raw materials purchases $260,640 Actual direct labor cost $7,878 Actual variable overhead cost $2,832 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:

$962 U $962 F $979 F $979 U

Explanation / Answer

direct labor rate variance = Actual cost( Actual quantity * actual rate) - standard cost( Actual quantity * standard rate)

= 7878 - 520 * 17

= 7878 - 8840 =- 962 favourable

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