Brief Exercise 11-5 Mordica Company’s standard labor cost per unit of output is

Question

Brief Exercise 11-5

Mordica Company’s standard labor cost per unit of output is $22 (2 hours x $11 per hour). During August, the company incurs 2,150 hours of direct labor at an hourly cost of $10.8 per hour in making 1,000 units of finished product.

Compute the total, price, and quantity labor variances. (Round answers to 2 decimal places, e.g. 52.75.)

Total labor variance

$

UnfavorableFavorableNeither favorable nor unfavorable Labor price variance

$

UnfavorableNeither favorable nor unfavorableFavorable Labor quantity variance

$

UnfavorableFavorableNeither favorable nor unfavorable

Explanation / Answer

Direct labor rate variance = ( Standard rate - Actual Rate ) * Actual hours worked

= ( 11-10.80) * 2150 i.e 430 Favourable

Direct labor efficiency variance = ( Stnadard hours for actual output - Actual Hours ) * Standard rate

= ( (1000*2) - 2150) * 11 i.e 1650 Unfavourable

Direct labor cost variance = ( Standard Cost - Actual Cost)

(( 2000*11)-(2150*10.80)) i.e 1220 Unfavourable

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