Lewis Companys standard labor cost of producing one unit of

Lewis Company’s standard labor cost of producing one unit of Product DD is 3.90 hours at the rate of $14.00 per hour. During August, 42,700 hours of labor are incurred at a cost of $14.17 per hour to produce 10,800 units of Product DD.

(a) Compute the total labor variance.

(b) Compute the labor price and quantity variances.

(c) Compute the labor price and quantity variances, assuming the standard is 4.12 hours of direct labor at $14.35 per hour.

Total labor variance

$

FavorableUnfavorableNeither favorable nor unfavorable

Solution

Per Unit: Standard Hours Standard Rate Standard Cost Standard Labor Cost 3.90 14.00 54.60 Actual Units 10800 For Actual Units: Standard Hours Standard Rate Standard Cost Standard Labor Cost 42,120 14.00 5,89,680 Actual Data: Actual Hours Actual Rate Actual Cost Actual Labor Cost 42,700 14.17 6,05,059 A Total DL Variance: (Standard Cost-Actual Costs) (589680-605059) -15379 Unfvaourable B Labor Price Variance: (Standard Rate-Actual Rate)*Actual Hours (14.00-14.17)*42700 -7259 Unfvaourable Labor Quantity Variance: (Standard Hours-Actual Hours)*S. Rate (42120-42700)*14 -8120 Unfvaourable C Base Data for C Part: Per Unit: Standard Hours Standard Rate Standard Cost Standard Labor Cost 4.12 14.35 59.12 Actual Units 10800 For Actual Units: Standard Hours Standard Rate Standard Cost Standard Labor Cost 44,496 14.35 6,38,518 Actual Data: Actual Hours Actual Rate Actual Cost Actual Labor Cost 42,700 14.17 6,05,059 Labor Price Variance: (Standard Rate-Actual Rate)*Actual Hours (14.35-14.17)*42700 7686 Favourable Labor Quantity Variance: (Standard Hours-Actual Hours)*S. Rate (44496-42700)*14.35 25773 Favourable