Epley Corporation makes a product with the following standard costs: Standard Qu

Question

Epley Corporation makes a product with the following standard costs:

Standard Quantity or Hours

Standard Price or Rate

Direct materials

3.5 pounds

$3.00 per pound

Direct labor

0.8 hours

$19.00 per hour

Variable overhead

0.8 hours

$8.00 per hour

In July the company produced 3,300 units using 12,240 pounds of the direct material and 2,760 direct labor-hours. During the month, the company purchased 13,000 pounds of the direct material at a cost of $35,100. The actual direct labor cost was $51,612 and the actual variable overhead cost was $20,148.

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 July is:

$828 F

$828 U

$792 U

$792 F

Standard Quantity or Hours

Standard Price or Rate

Direct materials

3.5 pounds

$3.00 per pound

Direct labor

0.8 hours

$19.00 per hour

Variable overhead

0.8 hours

$8.00 per hour

Explanation / Answer

Labor rate variance for July = 51612-(2760*19)= 828 F Option 1 is correct

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