Mohammed Company employs a standard cost system.Mohammed has established the following standards for one unit of product: $\begin{array}{|l|c|c|c|}
\hline & \text { Standard Quantity } & \begin{array}{c}
\text { Standard } \
\text { Price }
\end{array} & \begin{array}{c}
\text { Standard } \
\text { Cost }
\end{array} \
\hline \text { Direct materials } & 12.0 \text { pounds } & \$ 7.00 / \text { pound } & \$ 84.00 \
\text { Direct labor } & 2.6 \text { hours } & \$ 22.00 / \text { hour } & 57.20\\hline
\end{array}$ During June, Mohammed planned to produce 24,000 units of product.It purchased 330,000 pounds of direct material at a total cost of $2,343,000.The total factory wages for June were $1,440,000.Mohammed manufactured 25,000 units of product during June using 302,000 pounds of direct material and 64,000 direct labor hours.How much is the labor rate variance?
A)$32,000 unfavorable
B)$22,000 favorable
C)$10,000 favorable
D)$35,200 unfavorable

Question

Quizplus · Accepted Answer

The labor rate variance is calculated as (Actual Hours x Actual Rate) - (Actual Hours x Standard Rate). The actual rate is $1,440,000 / 64,000 hours = $22.50/hour. The variance is (64,000 x $22.50) - (64,000 x $22.00) = $32,000 unfavorable.

Mohammed Company Employs a Standard Cost System During June, Mohammed Planned to Produce 24,000 Units of Product