Lewis Company’s standard labor cost of producing one unit of Product DD is 3.6 h
ID: 2459023 • Letter: L
Question
Lewis Company’s standard labor cost of producing one unit of Product DD is 3.6 hours at the rate of $14.0 per hour. During August, 43,900 hours of labor are incurred at a cost of $14.20 per hour to produce 12,100 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 4.0 hours of direct labor at $14.40 per hour.
Explanation / Answer
Answer:(a) Total labor variance=( AH x AR ) - ( SH x SR )
=(43,900 x $14.20) - (43,560* x $14.00)
=$623380 - $609840
= $13,540 Unfavorable
Standard hours=*12,100 x 3.60 = 43560
Answer:(b) Labor price variance= ( AH x AR ) - ( AH x SR )
=(43,900 x $14.20) - (43900 x $14.00)
=$623380 - $614600
= $8780 Unfavorable
Labor quantity variance= ( AH x SR ) - ( SH x SR )
=(43,900 x $14.00) - (43,560 x $14.00)
= $614600-$609840
= $4760 Unfavorable
Answer: (c) Labor price variance= ( AH x AR ) - ( AH x SR )
=(43,900 x $14.20) - (43900 x $14.40)
=$623380 - $632160
= $8780 favorable
Labor quantity variance= ( AH x SR ) - ( SH x SR )
=(43,900 x $14.40) - ( 48400 x $14.40)
= $632160-$696960
= $64800 favorable
Standard hours=12100*4=48400 hours
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