Lewis Company’s standard labor cost of producing one unit of Product DD is 3.20
ID: 2474394 • Letter: L
Question
Lewis Company’s standard labor cost of producing one unit of Product DD is 3.20 hours at the rate of $11.00 per hour. During August, 42,300 hours of labor are incurred at a cost of $11.18 per hour to produce 13,000 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 3.50 hours of direct labor at $11.32 per hour.
Explanation / Answer
(a) Standard labour cost = 3.20x$11x13000 = $457600
Actual labour cost = 42300x$11.18 = $472914
Labour cost variance = Standard labour cost - Actual labour cost
= $457600 - $472914
= 15314 U
(b) Labour price variance = (S.R - A.R)Actual hors
= (11-11.18)x42300
= 7614U
Labour quantity variance = (standard hour - Actual hour)xStd.Rate
= (41600 - 42300)x11
= 7700U
(c)Labour price variance = (S.R - A.R)Actual hors
= (11.32-11.18)x42300
= 5922F
Labour quantity variance = (standard hour - Actual hour)xStd.Rate
= (45500 - 42300)x11.32
= 36224F
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