Question

Tico Inc. produces plastic bottles. Each bottle has a standard labor requirement of 0.03 hour. During the month of April, 900,000 bottles were produced using 25,200 labor hours @ $15.00. The standard wage rate is $13.50 per hour. Required: Calculate the total variance for production labor for the month of April. Enter amounts as positive numbers and select Favorable or Unfavorable.

Answer 1

Answer:

Total variance=$37,800

This is unfavorable since the actual cost of labor exceeds the standard cost of labor

Explanation:

To calculate the total variance for production labor for the month, we need to adopt the following expression;

Total labor variance=Actual cost-standard cost of actual hours

step 1: Calculate actual cost of labor

Actual cost of labor=actual hours×actual rate

actual hours=25,200 labor hours

actual rate=$15.00 per hour

replacing;

Actual cost of labor=(25,200×15)=$378,000

Actual cost of labor=$378,000

Step 2: Calculate standard cost of actual hours

Standard cost=actual hours×standard rate

where;

actual hours=25,200 labor hours

standard rate=$13.50

replacing;

Standard cost=(25,200×13.5)=$340,200

Standard cost=$340,200

Step 3: Total variance

Total variance=(378,000-340,200)=$37,800

Total variance=$37,800

This is unfavorable since the actual cost of labor exceeds the standard cost of labor