Question

Exercise 25-6 Lewis Company’s standard labor cost of producing one unit of Product DD is 3.1 hours at the rate of $12.7 per hour. During August, 42,200 hours of labor are incurred at a cost of $12.80 per hour to produce 13,500 units of Product DD. (a) Compute the total labor variance. Total labor variance $ (b) Compute the labor price and quantity variances. Labor price variance $ Labor quantity variance $ (c) Compute the labor price and quantity variances, assuming the standard is 3.4 hours of direct labor at $12.95 per hour. Labor price variance $ Labor quantity variance $

Answer 1

• A.The total labor variance is $8,315.
• B. The labor price variance is -$6,330 and the labor quantity variance is -$47,815.
• C. The labor price variance is $4,220 and the labor quantity variance is $4,445.

Step-by-step explanation:

(a) To compute the total labor variance, we need to calculate the difference between the standard labor cost and the actual labor cost incurred.

Standard labor cost = Standard hours * Standard rate

Standard labor cost = 3.1 hours * $12.7 per hour

Standard labor cost = $39.37 per unit

Actual labor cost = Actual hours * Actual rate

Actual labor cost = 42,200 hours * $12.80 per hour

Actual labor cost = $539,360

Total labor variance = Actual labor cost - Standard labor cost

Total labor variance = $539,360 - ($39.37 * 13,500 units)

Total labor variance = $539,360 - $531,045

Total labor variance = $8,315

Therefore, the total labor variance is $8,315.

(b) To compute the labor price variance and labor quantity variance, we need to compare the actual hours and rate to the standard hours and rate.

Labor price variance = (Actual rate - Standard rate) * Actual hours

Labor price variance = ($12.80 - $12.7) * 42,200 hours

Labor price variance = $0.10 * 42,200 hours

Labor price variance = $4,220

Labor quantity variance = (Actual hours - Standard hours) * Standard rate

Labor quantity variance = (42,200 hours - (13,500 units * 3.1 hours)) * $12.7 per hour

Labor quantity variance = (42,200 hours - 41,850 hours) * $12.7 per hour

Labor quantity variance = 350 hours * $12.7 per hour

Labor quantity variance = $4,445

Therefore, the labor price variance is $4,220 and the labor quantity variance is $4,445.

(c) Assuming the standard is 3.4 hours of direct labor at $12.95 per hour, we can calculate the labor price variance and labor quantity variance using the same formulas as in part (b).

Labor price variance = (Actual rate - Standard rate) * Actual hours

Labor price variance = ($12.80 - $12.95) * 42,200 hours

Labor price variance = -$0.15 * 42,200 hours

Labor price variance = -$6,330

Labor quantity variance = (Actual hours - Standard hours) * Standard rate

Labor quantity variance = (42,200 hours - (13,500 units * 3.4 hours)) * $12.95 per hour

Labor quantity variance = (42,200 hours - 45,900 hours) * $12.95 per hour

Labor quantity variance = -3,700 hours * $12.95 per hour

Labor quantity variance = -$47,815

Therefore, the labor price variance is -$6,330 and the labor quantity variance is -$47,815.

Answer 2

a. $8,665 favorable

b. The labor price and quantity variance is $4,220 favorable and $4,445 favorable respectively

c. The labor price and quantity variance is $10,550 unfavorable and $ 47,915 unfavorable respectively

Step-by-step explanation:

a. The computation of the total labor variance is shown below:

= (Actual hours × Actual rate) - (Standard hours × standard rate)

= (42,200 hours × $12.80 per hour) - (13,500 units × 3.1 hours × $12.7 per hour)

= $540,160 - $531,495

= $8,665 favorable

b.The computation of the labor price variance is shown below:

= Actual Hours × (Actual rate - standard rate)

= 42,200 × ($12.80 per hour - $12.7 per hour)

= 42,200 × $0.1 per hour

= $4,220 favorable

The computation of the labor quantity variance is shown below:

= Standard Rate × (Actual hours - Standard hours)

= $12.70 per hour × (42,200 hours - 41,850 hours)

= $12.70 per hour × 350 hours

= $4,445 favorable

c. The computation of the labor price variance is shown below:

= Actual Hours × (Actual rate - standard rate)

= 42,200 × ($12.7 per hour - $12.95 per hour)

= 42,200 × - $0.25 per hour

= $10,550 unfavorable

The computation of the labor quantity variance is shown below:

= Standard Rate × (Actual hours - Standard hours)

= $12.95 per hour × (42,200 hours - 45,900 hours)

= $12.95 per hour × - 3,700 hours

= $ 47,915 unfavorable