The Collins Corporation uses standard costing and has established the following direct material and direct labor standards for each unit of the single product it makes:
Direct materials: 4 gallons at $8 per gallon
Direct labor: 1 hour at $16 per hour
During July, the company made 6,000 units of product and incurred the following costs:
Direct materials purchased: 26,800 gallons at $8.20 per gallon
Direct materials used: 25,200 gallons
Direct labor used: 5,600 hours at $15.30 per hour
The direct materials purchases variance is computed when the materials are purchased.
The labor rate variance for July was:
A $3,920 Unfavorable
B $1,120 Favorable
C $6,120 Unfavorable
D $3,920 Favorable