Question

The standard cost of product 5252 includes 1.90 hours of direct labor at $17.40 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 $17.70 per hour and $82,200 of manufacturing overhead costs. It produced 2,000 units. (a) Compute the total, price, and quantity variances for labor.

Answer 1

Answer and Explanation:

a, The computation is shown below:

Computation of labor variances:

Total Labor variance = Standard Labor cost - Actual Labor cost

= {(2000 × 1.90 × $17.40) - (4000 × $17.70)

= $66,120 - $70,800

= $4,680 Unfavorable

Labor price variance = (Standard price - actual price) × actual labor hours

= ($17.40 - $17.70) × 4,000

= $1,200 Unfavorable

And,

Labor quantity variance = (Standard hours - actual hours) × standard rate per hour

= {(2,000 × 1.90) - 4,000) × $17.40

= $3,480 Unfavorable