Question

The standard cost of product 5252 includes 1.90 hours of direct labor at $14.30 per hour. The predetermined overhead rate is $22.00 per direct labor hour. During July, the company incurred 4,000 hours of direct labor at an average rate of $14.60 per hour and $80,100 of manufacturing overhead costs. It produced 2,000 units.
(a) Compute the total, price, and quantity variances for labor.
(b) Compute the total overhead variance.

Answer 1

Answer:

a) The total, price, and quantity variances for labor is $4,060 totally, $0.3 per direct labour, and 200 hours respectively  

b) The total overhead variance is $36,100

Explanation:

The variance is the difference between actual figures and standard figures.

The actual hour taken for 1 unit in July is 2.0 hour, so the quantity variance for labor in per unit is 0.1 hour = 2.0 – 1.9; then the total quantity variance for 2,000 units produced in July is 200 hours = 0.1 x 2,000

The price variance for labor is $0.3 = $14.60 - $14.30

The total standard cost for labor in July is $54,340 = $14.3 x 1.9 hours x 2,000 units

The total actual cost for labor in July is $58,400 = $14.6 x 2.0 hours x 2,000 units

So the variance in total labor cost of July is $4,060 = $58,400 - $54,340

The standard overhead cost for 2,000 units is $44,000, while the actual overhead cost in July is $80,100. So the total overhead variance is $36,100