Exercise 25-6 Lewis Company’s standard labor cost of producing one unit of Produ
ID: 2436453 • Letter: E
Question
Exercise 25-6
Lewis Company’s standard labor cost of producing one unit of Product DD is 3.8 hours at the rate of $10.9 per hour. During August, 41,500 hours of labor are incurred at a cost of $11.05 per hour to produce 10,800 units of Product DD.
(a)
Compute the total labor variance.
(b)
Compute the labor price and quantity variances.
(c)
Compute the labor price and quantity variances, assuming the standard is 4.1 hours of direct labor at $11.20 per hour.
FavorableNeither favorable nor unfavorableUnfavorable
Explanation / Answer
Answer a.
Actual Output = 10,800 units
Standard direct labor hours per unit = 3.80
Standard direct labor rate per hour = $10.90
Standard direct labor hours = Standard direct labor hours per unit * Actual output
Standard direct labor hours = 3.80 * 10,800
Standard direct labor hours = 41,040
Standard direct labor cost = Standard direct labor hours * Standard direct labor rate per hour
Standard direct labor cost = 41,040 * $10.90
Standard direct labor cost = $447,336
Actual direct labor cost = Actual direct labor hours * Actual direct labor rate per hour
Actual direct labor cost = 41,500 * $11.05
Actual direct labor cost = $458,575
Total Labor Variance = Actual direct labor cost - Standard direct labor cost
Total Labor Variance = $458,575 - $447,336
Total Labor Variance = $11,239 Unfavorable
Answer b.
Labor Price Variance = Actual direct labor cost - Actual direct labor hours * Standard direct labor rate per hour
Labor Price Variance = $458,575 - 41,500 * $10.90
Labor Price Variance = $6,225 Unfavorable
Labor Efficiency Variance = Actual direct labor hours * Standard direct labor rate per hour - Standard direct labor cost
Labor Efficiency Variance = 41,500 * $10.90 - $447,336
Labor Efficiency Variance = $5,014 Unfavorable
Answer c.
Actual Output = 10,800 units
Standard direct labor hours per unit = 4.10
Standard direct labor rate per hour = $11.20
Standard direct labor hours = Standard direct labor hours per unit * Actual output
Standard direct labor hours = 4.10 * 10,800
Standard direct labor hours = 44,280
Standard direct labor cost = Standard direct labor hours * Standard direct labor rate per hour
Standard direct labor cost = 44,280 * $11.20
Standard direct labor cost = $495,936
Actual direct labor cost = Actual direct labor hours * Actual direct labor rate per hour
Actual direct labor cost = 41,500 * $11.05
Actual direct labor cost = $458,575
Labor Price Variance = Actual direct labor cost - Actual direct labor hours * Standard direct labor rate per hour
Labor Price Variance = $458,575 - 41,500 * $11.20
Labor Price Variance = $6,225 Favorable
Labor Efficiency Variance = Actual direct labor hours * Standard direct labor rate per hour - Standard direct labor cost
Labor Efficiency Variance = 41,500 * $11.20 - $495,936
Labor Efficiency Variance = $31,136 Favorable
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