Question

Dillon has a standard of 2 hours of labor per unit, at $12 per hour. In producing 2,000 units, Dillon used 3,850 hours of labor at a total cost of $46,970. Dillon's total labor variance is

Answer 1

1,030 favorable

Step-by-step explanation:

Data given

Total cost = $46,970

Labor hours = 3,850

Standard hours = 2 hours per unit at $12 per hour

The computation of total variance is shown below:-

For computing the total variance first we need to find out the labor rate variance and labor efficiency variance

Labor rate variance = (Actual rate - Standard rate) × Actual hours

= ($46,970 ÷ 3,850 - 12) × 3,850

= ( 12.20 - $12) × 3850

= $770 unfavorable

Labor efficiency variance = (Standard hours - Actual hours) × standard rate

= (2 × 2,000 - 3,850) × $12

= (4,000 - 3,850) × $12

= 150 × 12

= $1,800 favorable

Total labor variance = Labor price variance + labor quantity variance

= 770 unfavorable + 1800 favorable

= 1,030 favorable

So, for computing the total variance we simply applied the above formula.