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 9.0 pounds $8.5 per pound Direct labor 0.8 hours $30.00 per hour Variable overhead 0.8 hours $14.00 per hour In July the company produced 3,410 units using 13,640 pounds of the direct material and 2,848 direct labor-hours. During the month, the company purchased 14,400 pounds of the direct material at a cost of $35,100. The actual direct labor cost was $85,030 and the actual variable overhead cost was $38,220. 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: $410 F $410 U $3,190 U $3,190

Explanation / Answer

AH = 2848

AR = 85030/2848 = 29.85604

SR = 30

labor rate variance = AH*(AR-SR) = 2848*((85030/2848)-30) = -410 = 410 F (option A)

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