Jackson Industries uses a standard cost system in which direct materials invento
ID: 2583899 • Letter: J
Question
Jackson Industries uses a standard cost system in which direct materials inventory is carried at standard cost. Jackson has established the following standards for one unit of product:
During May, Jackson purchased 139,500 pounds of direct material at a total cost of $711,450. The total factory wages for May were $574,700, 90 percent of which were for direct labor. Jackson manufactured 24,000 units of product during May using 116,500 pounds of direct material and 65,300 direct labor-hours.
The labor rate variance for May is:
$5,170 Favorable
$3,970 Unfavorable
$5,170 Unfavorable
$2,770 Favorable
Standard Quantity Standard Price or Rate Standard Cost Direct materials 5 pounds $4.90 per pound $24.50 Direct labor 2.70 hours $8.00 per hour $21.60Explanation / Answer
The labor rate variance = (Actual Cost ) - ( Actual Hours * Standard Rate )
= ( $ 574,700 *90%)- ( 65,300 * $ 8)
= $ 517,230- $ 522,400
= $ 5,170 Favorable
Hence the correct answer is $ 5,170 Favorable
Note : Since the actual labor cost is less than the standard labor cost, hence the variance is favorable.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.