Handerson Corporation makes a product with the following standard costs: Standar

Question

Handerson Corporation makes a product with the following standard costs: Standard Quantity or Hours Standard Price or Rate Direct materials 8.5 kilos $ 6.00 per kilo Direct labor 0.4 hours $ 20.00 per hour Variable overhead 0.4 hours $ 6.00 per hour The company reported the following results concerning this product in August. Actual output 3,200 units Raw materials used in production 29,030 kilos Purchases of raw materials 31,600 kilos Actual direct labor-hours 1,160 hours Actual cost of raw materials purchases $ 195,920 Actual direct labor cost $ 22,736 Actual variable overhead cost $ 7,540 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 August is: Multiple Choice

$464 U

$512 U

$464 F

$512 F

Explanation / Answer

LABOUR RATE VARIENCE = SR-AR×AH

=20-19.6×1160=464 F

*)

SR = STANDARD RATE

SR=20

AR= ACTUAL RATE

AR= 19.6=ACTUAL DIRECT LABOUR COST÷ACTUAL HOURS

=22736÷1160=19.6

AH= ACTUAL HOURS

AH= 1160

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