Question

Mordica Company’s standard labor cost per unit of output is $22.00 (2.00 hours x $11.00 per hour). During August, the company incurs 2,340 hours of direct labor at an hourly cost of $9.90 per hour in making 1,300 units of finished product.

Required:
Compute the total, price, and quantity labor variances.

Answer 1

Total labor variance = [(standard rate x standard hours) - (actual rate x actual hours)]

= [$11 x (1300 x 2)] - ($9.90 x 2340)

= $28600 - $23166

= $ 5434 unfavorable

Labor price variance = ( standard rate - actual rate) x actual hours

= ($11.00 - $9.90) x 2340

= $ 1.1 x 2340

= $2574 favorable

Labor quantity variance = standard x (standard hours - actual hours)

= $11.00 x [(1300 x 2) - 2340]

= $11.00 x (2600 - 2340)

= $11.00 x 260

= $2860 unfavorable