Lewis Company\'s standard labor cost of producing one unit of Product DD is 3.4

Question

Lewis Company's standard labor cost of producing one unit of Product DD is 3.4 hours at the rate of $13.8 per hour. During August, 43,700 hours of labor are incurred at a cost of $14.00 per hour to produce 12,600 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 3.8 hours of direct labor at $14.20 per hour Labor price variance Labor quantity variance

Explanation / Answer

(a) Total labor variance $ 20,608 Adverse (Unfavorable) Working: Total labor variance = Standard labor cost -Actual Labor cost = (12600*3.4*13.8)-(43700*14) =          -20,608 (b) Labor Price Variance $8740 Adverse (Unfavorable) Labor quantity variance $11868 Adverse (Unfavorable) Working: Labor price variance = (Standard Price-Actual Price)*Actual labor hours = (13.8-14.00)*43700 = -8740 Labor quantity Variance = (Standard labor hours-Actual labor hours)*Standard Labor rate = ((12600*3.4)-43700)*13.80 = -11868 (c) Labor Price Variance $         8,740 Favorable Labor quantity variance $       59,356 Favorable Working: Labor price variance = (Standard Price-Actual Price)*Actual labor hours = (14.20-14.00)*43700 = 8740 Labor quantity Variance = (Standard labor hours-Actual labor hours)*Standard Labor rate = ((12600*3.8)-43700)*14.20 = $       59,356

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