Lewis Company’s standard labor cost of producing one unit of Product DD is 3.4 h
ID: 2474006 • Letter: L
Question
Lewis Company’s standard labor cost of producing one unit of Product DD is 3.4 hours at the rate of $10.5 per hour. During August, 42,900 hours of labor are incurred at a cost of $10.70 per hour to produce 12,400 units of Product DD.
(a)
Compute the total labor variance.
Total labor variance $
Neither favorable nor unfavorable
Unfavorable
Favorable
(b)
Compute the labor price and quantity variances.
Labor price variance $
Neither favorable nor unfavorable
Unfavorable
Favorable
Labor quantity variance $
Unfavorable
Favorable
Neither favorable nor unfavorable
(c)
Compute the labor price and quantity variances, assuming the standard is 3.6 hours of direct labor at $10.85 per hour.
Labor price variance $
Unfavorable
Neither favorable nor unfavorable
Favorable
Labor quantity variance $
Unfavorable
Neither favorable nor unfavorable
Favorable
Explanation / Answer
A)Total labor variance = AH*AR - SH*SR
= (42900*10.7) - [(12400*3.4) * 10.5]
= 459030- 442680
= 16350 U
B)Labor price variance = AH [AR-SR]
= 42900 [10.7 -10.5]
= 42900 *.2
= 8580 U
Labor quanitty variance = SR [AH-SH]
= 10.5 [42900 - (12400*3.4)]
= 10.5 *[42900 - 42160]
= 7770 U
C) Price variance = 42900 [10.7 - 10.85]
= -6435 F
Quantity variance = 10.85 [42900- (12400* 3.6]
= 10.85 [42900- 44640]
= -18879
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