uestion #5: Hercules, Inc. reported the following information concerning the com

Question

uestion #5: Hercules, Inc. reported the following information concerning the company's Standard costing system for 2018: Standard Data Actual Data Materials Labor Budgeted fixed overhead Budgeted variable overhead Budgeted production 10 lbs. @ $4 per lbs. 3 hrs. @ $21 per hr. $100,000 $30 per unit 5,000 units Produced Materials purchased Materials used Labor worked Actual overhead 6,000 units 75,000 lbs. for $315,000 61,500 lbs 16,500 hrs. costing $330,000 $355,000 Instructions Calculate the labor price variance and the labor quantity variance.

Explanation / Answer

1) labour price variance = (standard rate - actual rate) x Actual hours

standard rate = 21, Actual rate = 330,000/16,500 = 20, Actual hours = 16,500

(21 - 20) x 16,500 = 16,500 F

2) labour quantity variance = (standard hours - actual hours) x standard rate

standard hours = 3 x 6000 = 18000, actual hours = 16500, standard rate = 21

(18,000 - 16,500) x 21 = 31,500 F

labour price variance 16,500 F labour quantity variance 31,500 F

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