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 $13.2 per hour. During August, 43,000 hours of labor are incurred at a cost of $13.30 per hour to produce 11,800 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 $13.50 per hour.

UnfavorableFavorableNeither favorable nor unfavorable

Explanation / Answer

a) Total labour variance = (11800*3.6*13.2)-(43000*13.30) = 11164 U

b) Labour price variance = (13.2-13.3)*43000 = 4300 U

Labour efficiency variance = (11800*3.6-43000)*13.2 = 6864 U

c) Labour price variance = (13.5-13.3)*43000 = 8600 F

Labour efficiency variance = (11800*3.9-43000)*13.5 = 40770 F

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