Question
Asked Nov 21, 2019
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Adams Company’s standard labor cost of producing one unit of Product DD is 4.00 hours at the rate of $12.00 per hour. During August, 40,600 hours of labor are incurred at a cost of $12.15 per hour to produce 10,000 units of Product DD.

a) What is the total labor variance?

b) What is the labor price and quantity variances?

c) What is the labor price and quantity variances, assuming the standard is 4.10 hours of direct labor at $12.25 per hour?

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Expert Answer

Step 1

(a) Compute direct labor variance.

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(Actual HoursxActual Rate)- |(Standard Hours Standard Rate ) (40,600x $12.15) (40,000x$12.00) Total labor variance $493,290-$480,000 -$13,290 Unfavorable

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Step 2

(b) Compute labor price variance and labor...

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Labor price variance [(Actual HoursxActual Rate) -- (Actual HoursxStandard Rate) (40,600x$12.15) (40,600x $12.00) Labor price variance= $493,290-$487,200 -$6,090 Unfavorable Labor quantity variance Labor Quantity Variance=Actual Hours Standard Rate) - (Standard Hours Standard Rate) - (40,600 x$12.00) - (40,000x $12.00) = $487,200-$480,000 $7,200 Unfavorable

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