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Wilson Company manufactures a product with a standard direct labor cost of 6.8 hours of labor...

Wilson Company manufactures a product with a standard direct labor cost of 6.8 hours of labor per unit at $9.40 per hour. Last month, 90 units were produced using 350 hours at $10.40 per hour. What was the company's total labor variance?

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Expert Solution

CALCULATION OF TOTAL LABOR VARIANCE
STANDARD HRS. REQUIRED PER UNIT= 6.8
STANDARD RATE PER HR. (IN $) 9.4
STANDARD COST PER UNIT 63.92
ACTUAL UNITS PRODUCED 90
ACTUAL HRS. USED 350
ACTUAL RATE PER HR. (IN $) 10.4
ACTUAL HR. PER UNIT= TOTAL ACTUAL HRS./TOTAL ACTUAL UNITS PRODUCED
350/90
3.889
TOTAL LABOR VARIANCE= (STANDARD RATE*STANDARD HOURS FOR ACTUAL OUTPUT)-(ACTUAL RATE*ACTUAL HRS. USED)
(9.4*6.8*90)-(10.4*350)
2113 FAVOURABLE
ALTERNATIVELY IT CAN BE WORKED OUT AS FOLLOWS:
LABOR RATE VARIANCE= (STANDARD RATE PER HR.-ACTUAL RATE PER HR.)*ACTUAL HRS. WORKED
(9.4-10.4)*350
-350 UNFAVOURABLE
LABOR QUANTITY VARIANCE= (STANDARD HR. FOR ACTUAL OUTPUT-ACTUAL HRS. FOR ACTUAL OUTPUT)*STANDARD RATE PER UNIT
(90*6.8-350)*9.4
2463 FAVOURABLE
TOTAL LABOR VARIANCE= LABOR RATE VARIANCE+LABOR QUANTITY VARIANCE
2113 FAVOURABLE

ekkarill92 answered 1 year ago
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