Russell and Sons, a CPA firm, established the following standard labor cost data
ID: 2400619 • Letter: R
Question
Russell and Sons, a CPA firm, established the following standard labor cost data for completing what the firm referred to as a Class 2 tax return. Russell expected each Class 2 return to require 4.0 hours of labor at a cost of $30 per hour. The firm actually completed 600 returns. Actual labor hours averaged 3.6 hours per return and actual labor cost amounted to $34.50 per hour. Required Determine the total labor variance and indicate whether it is favorable (F) or unfavorable (U). Determine the labor price variance and indicate whether it is favorable (F) or unfavorable (U). Determine the labor usage variance and indicate whether it is favorable (F) or unfavorable (U).
Explanation / Answer
Total labour variance = (600*4*30)-(600*3.6*34.50) = 2520 Unfavorable
Labour price variance = (30-34.50)2160 = 9720 Unfavorable
Labour usage variance = (2400-2160)*30 = 7200 Favorable
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