Question

1. Mordica Company's standard labor cost per unit of output is $33 ( 3. hours times $ 11. per hour). During August, the company

incurs 2970 hours of direct labor at an hour cost of $12.10 per hour in making 1100 units of finished product.

(a) Compute the labor variance

(b). Compute the labor quantity variance.

Answer 1

Ans. A	Labor variance = Standard labor cost - Actual labor cost
	$36,300 - $35,937
	$363	Favorable
Ans. B	Labor quantity variance = (Standard hours - actual hours) * Standard rate
	(3,300 - 2,970) * $11
	330 * $11
	$3,630	Favorable
	*WORKING NOTES:
	Standard hours = Actual output * standard hours per unit of output
	1,100 units * 3 hours per unit
	3,300 hours
	Standard labor cost = Standard hours * Standard labor rate
	3,300 * $11
	$36,300
	Actual labor cost = Actual hours * Actual labor rate
	2,970 * $12.10
	$35,937