Question

Pagley Company's standard labour cost of producing one unit of Product DD is 4 hours at the rate of $12 per hour During August, 40,800 hours of labour are incurred at a cost of $12.10 per hour to produce 10,000 units of Product Calculate the total direct labour variance: Is it favourable or unfavourable? Calculate the direct labour price variance: Is it favourable or unfavourable? Calculate the direct labour quantity variance: Is it favourable or unfavourable?

Answer 1

Total Direct Labour variance = Standard Cost - Actual Cost
= (10,000 x 4 x $12) - (40,800 x $12.10)
= $13,680 Unfavorable

Direct labour price variance = (Standard rate - actual rate) x Actual labour hours
= ($12 - $12.10) x 40,800
= $4,080 Unfavorable

Direct Labor Quantity variance = (Standard hours - Actual hours) x Standard Rate
= {(10,000 x 4) - 40,800} x $12
= $9,600 Unfavorable