Exercise 25-6 Lewis Company's standard labor cost of producing one unit of Product DD is 3.1 hours at the rate of $12.7 per hour. During August, 42,200 hours of labor are incurred at a cost of $12.80 per hour to produce 13,500 units of Product DD. (a) Compute the total labor variance. Total labor variance $ (b) Compute the labor price and quantity variances. Labor price variance $ Labor quantity variance $ (c) Compute the labor price and quantity variances, assuming the standard is 3.4 hours of direct labor at $12.95 per hour. Labor price variance $ Labor quantity variance $

a. $8,665 favorable

b. The labor price and quantity variance is $4,220 favorable and $4,445 favorable respectively

c. The labor price and quantity variance is $10,550 unfavorable and $ 47,915 unfavorable respectively

Explanation:

a. The computation of the total labor variance is shown below:

= (Actual hours * Actual rate) - (Standard hours * standard rate)

= (42,200 hours * $12.80 per hour) - (13,500 units * 3.1 hours * $12.7 per hour)

= $540,160 - $531,495

= $8,665 favorable

b. The computation of the labor price variance is shown below:

= Actual Hours * (Actual rate - standard rate)

= 42,200 * ($12.80 per hour - $12.7 per hour)

= 42,200 * $0.1 per hour

= $4,220 favorable

The computation of the labor quantity variance is shown below:

= Standard Rate * (Actual hours - Standard hours)

= $12.70 per hour * (42,200 hours - 41,850 hours)

= $12.70 per hour * 350 hours

= $4,445 favorable

c. The computation of the labor price variance is shown below:

= Actual Hours * (Actual rate - standard rate)

= 42,200 * ($12.7 per hour - $12.95 per hour)

= 42,200 * - $0.25 per hour

= $10,550 unfavorable

The computation of the labor quantity variance is shown below:

= Standard Rate * (Actual hours - Standard hours)

= $12.95 per hour * (42,200 hours - 45,900 hours)

= $12.95 per hour * - 3,700 hours

= $ 47,915 unfavorable