Do It! Review 23-3 The standard cost of product 5252 includes 1.90 hours of dire

Question

Do It! Review 23-3 The standard cost of product 5252 includes 1.90 hours of direct labor at $17.40 per hour. The predetermined overhead rate is $22.00 per direct labor hour. During July, the company incurred 4,000 hours of direct labor at an average rate of $17.70 per hour and $82,200 of manufacturing overhead costs. It produced 2,000 units. Compute the total, price, and quantity variances for labor. Total labor variance Labor price variance Labor quantity variance Compute the total overhead variance. Total overhead variance s Click if you would like to Show Work for this question: Open Show Work

Explanation / Answer

(a) Computation of labor variances:

Total Labor variance = Standard Labor cost - Actual Labor cost
= {(2000 x 1.90 x $17.40) - (4000 x $17.70)
= $66,120 - $70,800
= $4,680 Unfavorable

Labor price variance = (Standard price - actual price) x actual labor hours
= ($17.40 - $17.70) x 4,000
= $1,200 Unfavorable

Labor quantity variance = (Standard hours - actual hours) x standard rate per hour
= {(2,000 x 1.90) - 4,000) x $17.40
= $3,480 Unfavorable

(b) Total Overhead variance = Standard Overhead - Actual overhead
= (2000 x 1.90 x $22.00) - $82,200
= $1,400 Favorable

  

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