Milar Corporation makes a product with the following standard costs:
In January the company produced 2,000 units using 16,060 pounds of the direct material and 210 direct labor-hours. During the month, the company purchased 16,900 pounds of the direct material at a cost of $65,910. The actual direct labor cost was $4,473 and the actual variable overhead cost was $756.
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 January is:
A) $260 U
B) $273 U
C) $260 F
D) $273 F

Question

Milar Corporation makes a product with the following standard costs:
  In January the company produced 2,000 units using 16,060 pounds of the direct material and 210 direct labor-hours. During the month, the company purchased 16,900 pounds of the direct material at a cost of $65,910. The actual direct labor cost was $4,473 and the actual variable overhead cost was $756.
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 January is:
A) $260 U 
B) $273 U 
C) $260 F 
D) $273 F

Quizplus · Accepted Answer

Labor rate variance = (AH × AR) − (AH × SR)
= ($4,473) − (210 hours × $20.00 per hour)
= $4,473 − $4,200
= $273 U

Milar Corporation Makes a Product with the Following Standard Costs