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:

$3,920 Favorable

$3,920 Unfavorable

$6,120 Unfavorable

$1,120 Favorable