Question

Oriole Inc. produces a product requiring 3 direct labour hours at $20 per hour. During January, 1960 products are produced using 6220 direct labour hours. Oriole’s actual payroll during January was $1122940. What is the labour quantity variance?

Answer 1

Calculation of Labour quantity variance:

Direct labor quantity variance = (standard hours worked for actual production - actual hour worked)*standard rate per direct labor hour

standard hours worked for actual production = standard hours required per unit of production * actual units produced

= 3*1,960

= 5,880 hours

Actual hour worked = 6220 direct labor hours (given in question)

standard rate per direct labor hour = $ 20 (given in question)

put the values in above quantity variance formula

= (5,880 - 6220)*20

= 6,800 U