Question

Milar Corporation makes a product with the following standard costs: 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:

Answer 1

-$3,547 unfavorable

Explanation:

For the computation of labor rate variance for January first we need to find out the standard direct labor cost which is shown below:-

Standard Direct labor cost = Produced units × Standard quantity of direct labor × Standard price of direct labor

= 3,440 × 0.8 × $33

= $90,816

Labor rate Variance = Standard direct labor cost - Actual labor cost

= $90,816 - $94,363

= -$3,547 unfavorable

Therefore for computing the labor rate variance we simply applied the above formula.