Question

Exercise 25-6 Lewis Company's standard labor cost of producing one unit of Product DD is 3.6 hours at the rate of $13.1 per hour. During August, 40,600 hours of labor are incurred at a cost of $13.25 per hour to produce 11,200 units of Product DD. (a) Compute the total labor variance. Total labor variances (b) Compute the labor price and quantity variances. Labor price variance <> Labor quantity variances (c) Compute the labor price and quantity variances, assuming the standard is 3.9 hours of direct labor at $13.35 per hour. Labor price variance Labor quantity variances LINK TO TEXT LINK TO TEXT VIDEO: SIMILAR EXERCISE VIDEO: APPLIED SKILLS

Answer 1

a. Total Labour variance: Actual Hours *Actual rate - Standard hours* Standard Rate =40600*13.25 -(11200*3.6)*13.1 40320 =9758 Favourable b. Labour Price Variance Actual Hours*Actual rate - Actual hours * Standard Rate =40600*13.25-40600*13.1 6090 Favourable c. Labour Quantity variance Actual hours* standard rate - standard hours* standard rate =40600*13.1-13.1*40320 =531860-528192 =3668 favourable New Standard hours =43680 hours(11200*3.9) Standard rate =13.35 a. Labour Price Variance Actual Hours* Actual rate - Actual hours*Standard Rate =40600*13.25-40600*13.35 4060 Unfavourable b. Labour Quantity variance Actual hours* standard rate - standard hours* standard rate =40600*13.35-13.35*43680 =41118 unfavourable