Mordica Company’s standard labor cost per unit of output is $22.89 (2.10 hours x
ID: 2497992 • Letter: M
Question
Mordica Company’s standard labor cost per unit of output is $22.89 (2.10 hours x $10.90 per hour). During August, the company incurs 2,558 hours of direct labor at an hourly cost of $10.63 per hour in making 1,200 units of finished product.
Compute the total, price, and quantity labor variances. (Round answers to 2 decimal places, e.g. 52.75.)
$
UnfavorableFavorableNeither favorable nor unfavorable Labor price variance$
UnfavorableNeither favorable nor unfavorableFavorable Labor quantity variance$
FavorableNeither favorable nor unfavorableUnfavorableExplanation / Answer
LABOUR PRICE VARIANCE=(ACTUAL PRICE-STANDARD PRICE)ACTUAL HOURS
ACTUAL PRICE=$10.63
STANDARD PRICE=$10.90
ACTUAL HOURS=2,558 HOURS
LABOUR PRICE VARIANCE=($10.63-$10.90)2,558 HOURS=$690.66 FAVOURABLE
LABOUR QUANTITY VARIANCE=(ACTUAL HOURS-STANDARD HOURS)STANDARD PRICE
ACTUAL HOURS=2,558 HOURS
STANDARD HOURS=1,200 UNITS*2.10 HOURS=2,520 HOURS
STANDARD PRICE=$10.90
LABOUR QUANTITY VARIANCE=(2,558HOURS-2,520HOURS)$10.90=$414.2 UNFAVOURABLE
TOTAL LABOUR COST VARIANCE=LABOUR PRICE VARIANCE+LABOUR QUANTITY VARIANCE
=$690.66 FAVOURABLE+$414.2 UNFAVOURABLE
=$276.46 FAVOURABLE
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