Kartman Corporation makes a product with the following standard costs:
In June the company's budgeted production was 3,400 units but the actual production was 3,500 units. The company used 22,150 pounds of the direct material and 2,290 direct labor-hours to produce this output. During the month, the company purchased 25,400 pounds of the direct material at a cost of $170,180. The actual direct labor cost was $57,021 and the actual variable overhead cost was $8,931.
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) $1,890 F
B) $2,061 U
C) $2,061 F
D) $1,890 U

Question

Kartman Corporation makes a product with the following standard costs:
  In June the company's budgeted production was 3,400 units but the actual production was 3,500 units. The company used 22,150 pounds of the direct material and 2,290 direct labor-hours to produce this output. During the month, the company purchased 25,400 pounds of the direct material at a cost of $170,180. The actual direct labor cost was $57,021 and the actual variable overhead cost was $8,931.
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) $1,890 F 
B) $2,061 U 
C) $2,061 F 
D) $1,890 U

Quizplus · Accepted Answer

Labor rate variance = (AH × AR) − (AH × SR)
= ($57,021) − (2,290 hours × $24.00 per hour)
= $57,021 − $54,960
= $2,061 U

Kartman Corporation Makes a Product with the Following Standard Costs