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

Question

Exercise 15-6 Concord Company's standard labor cost of producing one unit of Product DD is 3.6 hours at the rate of $13.10 per hour. During August, 40,600 hours of labor are incurred at a cost of $13.25 per hour to produce 11,200 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 s Compute the labor price and quantity variances, assuming the standard is 3.9 hours of direct labor at $13.35 per hour. Labor price variance Labor quantity variance s

Explanation / Answer

Standard labor cost per unit = 3.6*13.10 = $ 47.16

Actual labor hours per unit = 40600/11200 = 3.625 hours

Actual labor cost per unit = 13.25*3.625 = $ 48.03

Labor variance = 48.03-47.16 = 0.8713   (unfavorable)

Total labor variance for 11200 units = 11200*0.8713 = $ 9758

Labor price variance = 13.25 - 13.10 = 0.15 (unfavorable)

Labor quantity variance = 3.625-3.6 = 0.025 (unfavorable)

Considering standard time of 3.6 hours at rate of 13.35 per hour

Labor price variance = 13.25 - 13.35 = -0.10 (favorable)

Labor quantity variance = 3.625-3.9 = -0.275 (favorable)

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