Miguez Corporation makes a product with the following standard costs:
The company budgeted for production of 2,600 units in September, but actual production was 2,500 units. The company used 5,440 liters of direct material and 1,680 direct labor-hours to produce this output. The company purchased 5,800 liters of the direct material at $7.20 per liter. The actual direct labor rate was $24.10 per hour and the actual variable overhead rate was $1.90 per hour.
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 September is:
A) $3,675 F
B) $3,528 U
C) $3,528 F
D) $3,675 U

Question

Miguez Corporation makes a product with the following standard costs:
  The company budgeted for production of 2,600 units in September, but actual production was 2,500 units. The company used 5,440 liters of direct material and 1,680 direct labor-hours to produce this output. The company purchased 5,800 liters of the direct material at $7.20 per liter. The actual direct labor rate was $24.10 per hour and the actual variable overhead rate was $1.90 per hour.
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 September is:
A) $3,675 F 
B) $3,528 U 
C) $3,528 F 
D) $3,675 U

Quizplus · Accepted Answer

Labor rate variance = AH × (AR − SR)
= 1,680 hours × ($24.10 per hour − $22.00 per hour)
= 1,680 hours × ($2.10 per hour)
= $3,528 U

Miguez Corporation Makes a Product with the Following Standard Costs