Question

Pippin Inc. has provided the following data concerning one of the products in its standard cost system. Variable manufacturing overhead is applied to products on the basis of direct labor-hours. Inputs Standard Quantity or Hours per Unit of Output Standard Price or Rate Direct materials 5.0 grams $ 7.00 per gram Direct labor 0.30 hours $ 21.30 per hour Variable manufacturing overhead 0.30 hours $ 9.60 per hour The company has reported the following actual results for the product for June: Actual output 8,500 units Raw materials purchased 48,100 grams Actual price of raw materials $ 7.70 per gram Raw materials used in production 42,490 grams Actual direct labor-hours 2,300 hours Actual direct labor rate $ 21.70 per hour Actual variable overhead rate $ 9.80 per hour The labor rate variance for the month is closest to:

Answer 1

Answer:

920 (Unfavorable)

Explanation:

Labor rate variance = Actual direct labor hours (Actual direct labor rate - Standard direct labor rate)

Labor rate variance = 2,300 * ($21.7 - $21.3)

Labor rate variance = 2,300 * 0.4

Labor rate variance = 920 (Unfavorable)