Grub Chemical Corporation has developed cost standards for the production of its new cologne, ChocO. The variable cost standards below relate to each 10 gallon batch of ChocO:
Variable manufacturing overhead at Grub is applied based on direct labor-hours. The actual results for last month were as follows:

-What is ChocO's labor rate variance?
A) $902 Favorable
B) $2,880 Favorable
C) $3,782 Favorable
D) $14,432 Favorable

Question

Grub Chemical Corporation has developed cost standards for the production of its new cologne, ChocO. The variable cost standards below relate to each 10 gallon batch of ChocO:
  Variable manufacturing overhead at Grub is applied based on direct labor-hours. The actual results for last month were as follows:
 
-What is ChocO's labor rate variance?
A) $902 Favorable 
B) $2,880 Favorable 
C) $3,782 Favorable 
D) $14,432 Favorable

Quizplus · Accepted Answer

AH × AR = $53,218
Labor rate variance = (AH × AR) − (AH × SR)
= ($53,218) − (4,510 hours × $12.00 per hour)
= $53,218 − $54,120
= $902 F

Grub Chemical Corporation Has Developed Cost Standards for the Production