Question

Exercise 25-6 Lewis Company's standard labor cost of producing one unit of Product DD is 3.9 hours at the rate of $13.2 per hour. During August, 40,800 hours of labor are incurred at a cost of $13.30 per hour to produce 10,300 units of Product DD. (a) Compute the total labor variance. Total labor variance (b) Compute the labor price and quantity variances. Labor price variance Labor quantity variance A (c) Compute the labor price and quantity variances, assuming the standard is 4.2 hours of direct labor at $13.50 per hour. Labor price variance Labor quantity variance

Answer 1

Working : Actual Hours Standard Hours for Actual Output (3.9Hours per unit * 10300 units) Actual Rate Standard Rate 40800 40170 $13.30 $13.20 Requirement (A) Total Labour Variance = Actual Hours * Actual Rate - Standard Hours * Standard Rate (40800*13.3)-(40170*13.2) $ 12,396.00 Unfavourable Requirement (B) Labour Price Variance = Actual Hours * Actual Rate - Actual Hours * Standard Rate (40800*13.3)-(40800*13.2) 4,080.00 Unfavourable Labour Quantity Variance - Actual Hours * Standard Rate - Standard Hours * Standard Rate (40800*13.2)-(40170*13.2) $ 8,316.00 Unfavourable Requirement (C) Working: Actual Hours Standard Hours for Actual Output (4.2 Hours per unit * 10300 units) Actual Rate Standard Rate 40800 43260 $13.30 $13.50 Labour Price Variance - Actual Hours * Actual Rate - Actual Hours * Standard Rate (40800*13.3)-(40800*13.5) 8,160.00 Favourable Labour Quantity Variance = Actual Hours * Standard Rate - Standard Hours * Standard Rate (40800*13.5)-(43260*13.5) $ 33,210.00 Favourable