Exercise 25-6 Lewis Company\'s standard labor cost of producing one unit of Prod

Question

Exercise 25-6 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 Compute the total labor variance. Total labor variances Compute the labor price and quantity variances. Lahor pric vriac Labor quantity variances Compute the labor price and quantity variances, assuming the standard is 3.9 hours of direct labor at $13.35 per hour. Labor price variances Labor quantity variance LINK TO TEXT LINK TO TEXT

Explanation / Answer

Ans.4(a) Total labour Variance: (Standard rate x Standard hours)- (Actual rate x Actual hours) [$13.1 x (11,200 x 3.6) ] - [ $13.25 x 40,600 ] 528,192 - 537,950 $ 9758 (Adverse) Ans.4(b) Labour price variance: ( Standard Rate - Actual Rate ) x Actual Hours ( 13.1 - 13.25 ) x 40,600 $ 6,090 (Adverse) Labour quantity variance: Standard Rate x ( Standard hours-Actual hours) 13.1 x [ (11,200 x 3.6)-40,600] $ 3,668 (Adverse) Ans.4(c) Computation of labour price and quantity variances when standard is 3.9 hours of direct labour at $13.35 per hour Labour price variance: ( Standard Rate - Actual Rate ) x Actual Hours ( 13.35 - 13.25 ) x 40,600 $ 4,060 (Favorable) Labour quantity variance: Standard Rate x ( Standard hours-Actual hours) 13.35 x [ (11,200 x 3.9)-40,600] $ 41,118 (Favorable)

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