During January, Ajax Co. incurs 1,850 hours of direct labor at an hourly cost of

Question

During January, Ajax Co. incurs 1,850 hours of direct labor at an hourly cost of $11.80 in producing 1,000 units of its finished product. Ajax standard labor cost per unit of output is $22 (2 hours x $11.00).

Compute the total, price, and quantity labor variances for Ajax Co. for January. Identify whether the variance is favorable or unfavorable?

Total Labor Variance $ FavorableUnfavorableNot Applicable Labor Price Variance $ FavorableUnfavorableNot Applicable Labor Quantity Variance $ FavorableUnfavorableNot Applicable

Explanation / Answer

Answer:

Total labor variance = $170 F, (1,850 × $11.80) – (2,000 × $11.00).

Labor price variance = $1,480 U, (1,850 × $11.80) – (1,850 × $11.00).

Labor quantity variance = $1,650 F, (1,850 × $11.00) – (2,000 × $11.00).

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