Galla Corporation makes a product with the following standard costs

Galla Corporation makes a product with the following standard costs:

	Standard Quantity or Hours	Standard Price or Rate	Standard Cost Per Unit
Direct materials	8.2 pounds	$7.00 per pound	$57.40
Direct labor	0.4 hours	$20.00 per hour	$8.00
Variable overhead	0.4 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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