Milton Company uses a standard cost system. Standards call for 2 direct labor hours per widget....
Milton Company uses a standard cost system.
- Standards call for 2 direct labor hours per widget. The standard labor rate is $10 per hour.
- Four pounds of material are needed for each widget at a standard cost of $2.25 per pound.
Milton actually produces 17,000 widgets during the year.
- Direct labor costs are $359,100 for 34,200 hours.
- Milton purchased and used 70,000 pounds of materials at $2.50 per pound.
For direct labor, what is the rate (price) variance? Answers are labeled as favorable (F) or unfavorable (U).
| A. |
$34,200 U |
|
| B. |
$17,100 U |
|
| C. |
$8,500 U |
|
| D. |
$19,100 U |
|
| E. |
$17,000 F |
Homework Answers
Labor rate variance
= (SR-AR) * AH
= (10 - 359,100/34,200) * 34,200
= (10 - 10.5) * 34,200
= 17,100 U
OPTION B
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