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Galla Corporation makes a product with the following standard costs

Galla Corporation makes a product with the following standard costs: 


Standard Quantity or HoursStandard Price or RateStandard Cost Per Unit
Direct materials8.2 pounds$7.00 per pound$57.40
Direct labor0.4 hours$20.00 per hour$8.00
Variable overhead0.4 hours$2.00 per hour$0.80


The company budgeted for production of 2,400 units in June, but actual production was 2,500 units. The company used 19,850 pounds of direct material and 980 direct labor-hours to produce this output. The company purchased 21,700 pounds of the direct material at $6.70 per pound. The actual direct labor rate was $19.20 per hour and the actual variable overhead rate was $1.80 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 June is:

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Expert Solution

Answer

SR

$ 20 per hour

AH

980 hrs

AR

$ 19.20 per hr

Labour rate variance = Actual Time * (Standard Rate – Actual Rate)

    = 980 ($ 20- $ 19.20)

   = $ 784 (Favourable)

ekkarill92 answered 2 years ago
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