Kendra’s Company standard labor cost of producing one unit of Product DD is 4 hours at the rate of $12.00 per hour. During August, 40,800 hours of labor are incurred at a cost of $12.10 per hour to produce 10,000 units of Product DD. (a)compute the total labor variance (b)compute the labor price and quantity variances. (c)repeat (b), assuming the standard is 4.2 hours of direct labor at $12.25 per hour.
(a) Total labor variance:
= ( AH X AR ) – ( SH X SR )
= (40,800 X $12.10) – (40,000* X $12.00)
= $493,680 – $480,000
= $13,680 U
*10,000 X 4
(b) Labor price variance:
= ( AH X AR ) – ( AH X SR )
= (40,800 X $12.10) – (40,800 X $12.00)
= $493,680 – $489,600
= $4,080 U
Labor quantity variance:
= ( AH X SR ) – ( SH X SR )
= (40,800 X $12.00) – (40,000 X $12.00)
= $489,600 – $480,000
= $9,600 U
(c) Labor price variance:
= ( AH X AR ) – ( AH X SR )
= (40,800 X $12.10) – (40,800 X $12.25)
= $493,680 – $499,800
= $6,120 F
Labor quantity variance:
= ( AH X SR ) – ( SH X SR )
= (40,800 X $12.25) – (42,000 X $12.25)
= $499,800 – $514,500
= $14,700 F
