Question

The standard cost of product 5252 includes 1.90 hours of direct labor at $11.20 per hour. The predetermined overhead rate is $22.00 per direct labor hour. During July, the company incurred 4,000 hours of direct labor at an average rate of $11.40 per hour and $82,200 of manufacturing overhead costs. It produced 2,000 units.

(a)

Compute the total, price, and quantity variances for labor.

Total labor variance		$		Unfavorable or Favorable
Labor price variance		$		Unfavorable or Favorable
Labor quantity variance		$		Unfavorable or Favorable

(b)

Compute the total overhead variance.

Total overhead variance

$

Unfavorable or Favorable

Answer 1

WORKING NOTES FOR SOLUTION A:
									Actual Cost for 2,000 Units
	Standard Cost Per unit				Standard Cost for Actual Production
	Standard Time	Std. Rate	Total Cost		Standard Time	Std. Rate	Total Std. Cost		Actual Time	Act. Rate	Actual Cost
	1.9	$             11.20	$                     21.28		3800	$     11.20	$                   42,560		4000	$      11.40	$                   45,600
	Hrs	Per Hours			Hrs (2,000 X 1.90)	Per Hours			Hrs	Per Hours
SOLUTION : A
	Labour Total Cost Variance = Standard Cost of Labour - Actual Cost of Labour
	Labour Cost Variance =		$             42,560.00	'-'	$             45,600.00
	Labour Cost Variance =		$               3,040.00	(Unfavorable)
	Labour Rate Variance = (Actual Rate - Standard Rate) X Actual Hours
	Labour Rate Variance =                 (		$                     11.40	'-'	$                      11.20	) X	4,000
	Labour Rate Variance =		$                        0.20	X	4,000
	Labour Rate Variance =		800	(Unfavorable)
	Labour Efficiency Variance = (Actual Hours - Standard Hours ) X Standard Rate
	Labour Efficiency Variance = (		4,000.00	'-'	3,800.00	) X	$                     11.20
	Labour Efficiency Variance =		200	X	$                      11.20
	Labour Efficiency Variance =		2240	(Unfavorable)
WORKING NOTES FOR SOLUTION B:
					Actual Cost for 2,000 Units
	Standard Cost for Actual Production
	Standard Time	Std. Rate	Total Std. Cost		Actual Time	Act. Rate	Actual Cost
	3800	$             22.00	$                   83,600		4000	$     20.55	$                   82,200
	Hrs (2,000 X 1.90)	Per Hours			Hrs	Per Hours
SOLUTION : B
	Total Overhead Variances = Total Standard Overhead - Total Actual Overhead
	Labour Cost Variance =		$             83,600.00	'-'	$             82,200.00
	Labour Cost Variance =		$               1,400.00	(Favorable)