Question

Brief Exercise 15-5 Indigo Company’s standard labor cost per unit of output is $32.77 (2.90 hours x $11.30 per hour). During August, the company incurs 3,532 hours of direct labor at an hourly cost of $11.75 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

Total labour variance = (Actual hours * Actual rate) - (Standard hours * Standard rate)

= ($3,532 * $11.75) - [(1,200*2.90) * $11.30]

= $41,501 - $39,324

= $2,177 Unfavourable.

Labour price variance = (Actual hours * Actual rate) - (Actual hours * Standard rate)

= (3,532 * $11.75) - (3,532 * $11.30)

= $41,501 - $39,911.6

= $1,589.4 Unfavourable.

Labor quantity variance = (Actual hours * Standard rate) - (Standard hours * Standard rate)

= (3,532 * $11.30) - [(1,200*2.90) * $11.30]

= $39,911.6 - $39,324

= $587.6 Unfavourable