Question

Habelt Company's labor cost per unit is $45 (3 hours x $15 per hour). For the month of May, Habelt Company had 3,600 hours of direct labor with an hourly cost of $40.50 per hour and made 1,300 units of finished product. Find total, price, and quantity variance.

Figure out what the total, price, and quantity variances are from the given information.

Answer 1

Given Information,
SR = $ 15
Standard hour per unit is 3 hours
AR = $ 40.50
Production = 1,300 units
Calculation of Direct labor price variance is as follows:
Direct Labor price variance = ( SR - AR ) * AH
= ( $ 15 - $ 40.50 ) * 3,600
= $ 91,800 Unfavorable
Therefore, Direct labor price variance $ 91,800 Unfavorable
Calculation of Direct labor quantity variance is as follows:
Direct Labor Quantity variance = ( SH - AH ) * SR
= ( 3,900 - 3,600 ) * $ 15
= $ 4,500 Favorable
Thus, Direct Labor quantity variance is $ 4,500 Favorable
Working note:
SH = Actual Production * Standard hours per unit
= 1,300 units * 3 hours
= 3,900 hours
Calculation of Direct labor cost variance is as follows:
Direct Labor cost variance = Standard cost - Actual cost
= ( SR * SH ) - ( AR * AH )
= ( $ 15 * 3,900 ) - ( $ 40.50 * 3,600 )
= $ 58,500 - $ 145,800
= $ 87,300 Unfavorable
Thus, Direct Labor efficiency variance is $ 87,300 Unfavorable
Where,
AH	Actual labor hours
SH	Standard labor hours
AR	Actual labor rate per hour
SR	Standard labor rate per hour