Do It! Review 11-3 The standard cost of product 5252 includes 1.90 hours of dire

Question

Do It! Review 11-3 The standard cost of product 5252 includes 1.90 hours of direct labor at $10.60 per hour. The predetermined overhead rate is $22.00 per direct labor hour. During July, the company incurred 4,000 hours of direct labor at an average rate of $10.90 per hour and $80,400 of manufacturing overhead costs. It produced 2,000 units. Compute the total, price, and quantity variances for labor. Total labor variance Labor price variance Labor quantity variances Compute the total overhead variance Total overhead variance

Explanation / Answer

(a) Total labor variance = (AQ x AR) - (SQ x SR) = (4000 x $10.90) - (3800 x $10.60) = $43600 - $40280 = $3320 Unfavorable

Labor price variance = AQ x (AR - SR) = 4000 x ($10.90 - $10.60) = 4000 x $0.30 = $1200 Unfavorable

Labor quantity variance = SR x (AQ -SQ) = $10.60 x (4000 - 3800) = $10.60 x 200 = $2120 Unfavorable

SQ = 2000 units x 1.90 hours = 3800

(b) Total overhead variance = $80400 - (3800 x $22) = $80400 - $83600 = $3200 Favorable

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