Lewis Company\'s standard labor cost of producing one unit of Product DD is 3.70

Question

Lewis Company's standard labor cost of producing one unit of Product DD is 3.70 hours at the rate of $11.00 per hour. During August, 41,300 hours of labor are incurred at a cost of $11.13 per hour to produce 11,000 units of Product DD. Compute the total labor variance. Total labor variance $ Compute the labor price and quantity variances. Labor price variance $ Labor quantity variance $ Compute the labor price and quantity variances, assuming the standard is 3.91 hours of direct labor at $11.24 per hour. Labor price variance $ Labor quantity variance $

Explanation / Answer

Solution:

Total Labor Variance = Labor Price Variance + Labor Quantity Variance

= $5,369 + $6,600

= $11,969 Unfavorable

Labor Price Variance = Actual Hours (Standard Rate per hour – Actual Rate Per Hour)

= 41,300 ($11 - $11.13)

= $5,369 Unfavorable

Labor Quantity Variance = Standard Rate per hour (Standard Hours for Actual Production – Actual Hours)

Standard Quantity for Actual Production = Actual Production x Standard hours needed for 1 unit = 11,000 Units x 3.70 hours = 40,700 Hours

Labor Quantity Variance = $11 (40,700 – 41,300) = $6,600 Unfavorable

Calculation of Labor Price and Quantity variance, assuming standard is 3.91 hours of direct labor at $11.24 per hour.

Labor Price Variance = Actual Hours (Standard Rate per hour – Actual Rate Per Hour)

= 41,300 ($11.24 - $11.13)

= $4,543 Favorable

Labor Quantity Variance = Standard Rate per hour (Standard Hours for Actual Production – Actual Hours)

Standard Quantity for Actual Production = Actual Production x Standard hours needed for 1 unit = 11,000 Units x 3.91 hours = 43,010 Hours

Labor Quantity Variance = $11.24 (43,010 – 41,300) = $19,220.40 Favorable

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