Question

Exercise 11-6 (Video) Lewis Company’s standard labor cost of producing one unit of Product DD is 3.40 hours at the rate of $13.80 per hour. During August, 43,700 hours of labor are incurred at a cost of $14.00 per hour to produce 12,600 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 $ (c) Compute the labor price and quantity variances, assuming the standard is 3.80 hours of direct labor at $14.20 per hour. Labor price variance $ Labor quantity variance $

Answer 1

(a)
Total labor variance	$20,608	Adverse (Unfavorable)
Working:
Total labor variance	=	Standard labor cost -Actual Labor cost
	=	(12600*3.4*13.8)-(43700*14)
	=	-20,608

(b)
Labor Price Variance	$8,740	Adverse (Unfavorable)
Labor quantity variance	$11,868	Adverse (Unfavorable)
Working:
Labor price variance	=	(Standard Price-Actual Price)*Actual labor hours
	=	(13.8-14.00)*43700
	=	-8740
Labor quantity Variance	=	(Standard labor hours-Actual labor hours)*Standard Labor rate
	=	((12600*3.4)-43700)*13.80
	=	-11868

(c)
Labor Price Variance	$         8,740	Favorable
Labor quantity variance	$       59,356	Favorable
Working:
Labor price variance	=	(Standard Price-Actual Price)*Actual labor hours
	=	(14.20-14.00)*43700
	=	8740
Labor quantity Variance	=	(Standard labor hours-Actual labor hours)*Standard Labor rate
	=	((12600*3.8)-43700)*14.20
	=	$       59,356