Question

Mordica Company’s standard labor cost per unit of output is $33.60 (3.00 hours x $11.20 per hour). During August, the company incurs 3,045 hours of direct labor at an hourly cost of $11.70 per hour in making 1,000 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 Labor Variance = $ 2,026.50 Unfavourable [See Spending variance below]
>Labor Price Variance = $ 1,522.50 Unfavourable
>Labor Quantity Variance = $ 504 Unfavourable

• Workings

Labor Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                              11.20	-	$                    11.70	)	x	3045
	-1522.5
	Variance		$              1,522.50			Unfavourable-U
Labour Efficiency Variance
(	Standard Hours = 1000 units x 3 hrs	-	Actual Hours	)	x	Standard Rate
(	3000	-	3045	)	x	$                        11.20
	-504
	Variance		$                  504.00			Unfavourable-U
Labor Spending Variance
(	Standard Cost = 1000 units x $ 33.60]	-	Actual Cost = 3045 hrs x $ 11.70	)
(	$                      33,600.00	-	$            35,626.50	)
	-2026.5
	Variance		$              2,026.50			Unfavourable-U