Question

Question 3 Mordica Company’s standard labor cost per unit of output is $21.00 (2.10 hours x $10.00 per hour). During August, the company incurs 2,772 hours of direct labor at an hourly cost of $11.00 per hour in making 1,200 units of finished product. Compute the total, price, and quantity labor variances. (Round answers to 2 decimal places, e.g. 52.75.) Total labor variance $ Labor price variance $ Labor quantity variance $

Answer 1

Standard labor hours for actual production = Actual units produced * Standard hours per unit = 1,200 units * 2.1 hours = 2,520 hours

Standard labor cost for actual production = Standard labor hours for actual production * Standard labor rate per hour = 2,520 hours * $10 = $25,200

Actual labor cost = Actual hours incurred * Actual labor rate per hour = 2,772 hours * $11 = $30,492

Total labor variance = Standard cost - Actual cost = $25,200 - $30,492 = $5,292 Unfavorable

Labor price variance = ( Standard rate - Actual rate ) * Actual hours = ( $10 - $11 ) * 2,772 hours = $2,772 Unfavorable

Labor quantity variance = ( Standard hours - Actual hours ) * Standard rate = ( 2,520 hours - 2,772 hours ) * $10 = $2,520 Unfavorable