Lewis Company’s standard labor cost of producing one unit of Product DD is 3.6 h

Question

Lewis Company’s standard labor cost of producing one unit of Product DD is 3.6 hours at the rate of $13.1 per hour. During August, 40,600 hours of labor are incurred at a cost of $13.25 per hour to produce 11,200 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 3.9 hours of direct labor at $13.35 per hour.

FavorableNeither favorable nor unfavorableUnfavorable

Explanation / Answer

Total labour variance = (11200*3.6*13.10)-(40600*13.25) = 9758 Unfavorable

b) Labour price variance = (13.10-13.25)*40600 = 6090 Unfavorable

Labour quantity variance = (11200*3.6-40600)*13.10 = 3668 Unfavorable

c) Labour price variance = (13.35-13.25)*40600 = 4060 Favorable

Labour quantity variance = (11200*3.9-40600)*13.35 = 41118 Unfavorable

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