Exercise 15-6 Pronghorn Company\'s standard labor cost of producing one unit of

Question

Exercise 15-6 Pronghorn Company's standard labor cost of producing one unit of Product DD is 3.0 hours at the rate of $12.60 per hour. During August, 40,500 hours of labor are incurred at a cost of $12.75 per hour to produce 13,300 units of Product DD. Compute the total labor variance Total labor variance Compute the labor price and quantity variances. Labor price variance s Labor quantity variance s Compute the labor price and quantity variances, assuming the standard is 3.2 hours of direct labor at $12.85 per hour. Labor price variances Labor quantity variance s

Explanation / Answer

Total labor Variance=Actual Hours X Actual Rate - Standard Hours X Standard rate

Actual Hours = 40500

Standard Hours =3*13300 = 39900

Standard rate $12.6 per hour

Actual rate $12.75 per hour

Total labor variance = (40500*12.75)-(39900*12.6) = 516375-502740 = 13635

b) Labor price variance = Actual hours * Actual rate – Actual hours*standard rate

= (40500*12.75)-(40500*12.6) = 516375-510300 = 6075

Labor Quantity variance = (Actual hours*standard rate)-(Standard hours*Standard rate)

= (40500*12.6) – (39900*12.6) = 510300 – 502740 = 7560

c) Actual Hours = 40500

Standard Hours =3.2*13300 = 42560

Standard rate $12.85 per hour

Actual rate $12.75 per hour

Labor price variance = Actual hours * Actual rate – Actual hours*standard rate

= (40500*12.75)-(40500*12.85) = 516375-520425 = -4050

Labor Quantity variance = (Actual hours*standard rate)-(Standard hours*Standard rate)

= (40500*12.85) – (42560*12.85) = 520425 – 546896 = -26471

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