| Hurren Corporation makes a product with the following standard costs: |
| Standard Quantity or Hours | Standard Price or Rate | Standard Cost Per Unit | |
| Direct materials | 8.60 grams | $8.00 per gram | $68.80 |
| Direct labor | 0.3 hours | $17.00 per hour | $5.10 |
| Variable overhead | 0.3 hours | $8.00 per hour | $2.40 |
| The company reported the following results concerning this product in June. |
| Originally budgeted output | 5,600 | units |
| Actual output | 5,700 | units |
| Raw materials used in production | 40,200 | grams |
| Purchases of raw materials | 46,100 | grams |
| Actual direct labor-hours | 590 | hours |
| Actual cost of raw materials purchases | $261,690 | |
| Actual direct labor cost | $8,053 | |
| Actual variable overhead cost | $3,014 |
| 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 June is: |
A.$1,994 F
B.$1,994 U
C.$1,977 F
D.$1,977 U
nswer : D $ 1977 U
Working notes for the above answer is as under
We have provided that Actual Hours are 590 hours
Actual labour cost is 8053 so now we will find out Actual labour cost per hour
= Actual labour cost / Actual production
=8053/ 590
=13.65 per hour
The labor rate variance for June is:
Labor rate variance = AH(AR – SR)
= 590 hours ($13.65 per hour – $17.00 per hour)
= 590 hours ( -$ 3.35 per hour)
= $1977 U
D.$1,977 U
