Exercise 23-6 Lewis Company’s standard labor cost of producing one unit of Produ
ID: 2448845 • Letter: E
Question
Exercise 23-6
Lewis Company’s standard labor cost of producing one unit of Product DD is 3.50 hours at the rate of $14.00 per hour. During August, 41,800 hours of labor are incurred at a cost of $14.14 per hour to produce 11,800 units of Product DD.
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Exercise 23-6
Lewis Company’s standard labor cost of producing one unit of Product DD is 3.50 hours at the rate of $14.00 per hour. During August, 41,800 hours of labor are incurred at a cost of $14.14 per hour to produce 11,800 units of Product DD.
Explanation / Answer
TOTAL LABOUR VARIANCE=ACTUAL LABOUR COST-STANDARD LABOUR COST
=41,800 HOURS*$14.14 - 41,300 HOURS*$14
=$5,91,052 - $ 5,78,200
=$ 12,852 UNFAVOURABLE
LABOUR PRICE VARIANCE=(ACTUAL RATE-STANDARD RATE)ACTUAL HOURS
ACTUAL RATE=$14.14
STANDARD RATE=$14
ACTUAL HOURS=41,800
LABOUR PRICE VARIANCE=($14.14-$14)41,800
=$5,852 UNFAVOURABLE
LABOUR QUANTITY VARIANCE=(ACTUAL HOURS-STANDARD HOURS)STANDARD RATE
ACTUAL HOURS=41,800
STANDARD RATE=$14
STANDARD HOURS=3.5 HOUR FOR 1 UNIT=3.5*11,800 UNITS=41,300 HOURS
LABOUR QUANTITY VARIANCE=(41,800-41,300)$14
=$7,000 UNFAVOURABLE
WHEN STANDARD IS 3.89 HOURS AT $14.28 PER HOUR
LABOUR PRICE VARIANCE=(ACTUAL RATE-STANDARD RATE)ACTUAL HOURS
ACTUAL RATE=$14.14
STANDARD RATE=$14.28
ACTUAL HOURS=41,800
LABOUR PRICE VARIANCE=($14.14-$14.28)41,800
= - $5,852 FAVOURABLE
LABOUR QUANTITY VARIANCE=(ACTUAL HOURS-STANDARD HOURS)STANDARD RATE
ACTUAL HOURS=41,800
STANDARD RATE=$14.28
STANDARD HOURS=3.89 HOUR FOR 1 UNIT=3.89*11,800 UNITS=45,902 HOURS
LABOUR QUANTITY VARIANCE=(41,800-45,902)$14.28
= - $58,577 FAVOURABLE
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