Question

Russell and Sons, a CPA firm, established the following standard labor cost data for completing what the firm referred to as a Class 2 tax return. Russell expected each Class 2 return to require 4.6 hours of labor at a cost of $53 per hour. The firm actually completed 600 returns. Actual labor hours averaged 4.3 hours per return and actual labor cost amounted to $61 per hour.

Required

Determine the total labor variance and indicate whether it is favorable (F) or unfavorable (U).

Determine the labor price variance and indicate whether it is favorable (F) or unfavorable (U).

Determine the labor usage variance and indicate whether it is favorable (F) or unfavorable (U).

(For all requirements, do not round intermediate calculations and select "None" if there is no effect (i.e., zero variance).)

	a. Total labor variance b. Total labor price variance c. Total labor usage variance

Answer 1

• Total Labor Variance

Total Labor Variance
(	Standard Cost = 600 returns x 4.6 hrs x $ 53	-	Actual Cost = 600 return x 4.3 hrs x $ 61	)
(	$                   146,280.00	-	$          157,380.00	)
	-11100
	Variance		$            11,100.00			Unfavourable-U

• Labor Price Variance

Labor Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                              53.00	-	$                    61.00	)	x	2580
	-20640
	Variance		$            20,640.00			Unfavourable-U

• Labor Usage Variance

Labour Usage Variance
(	Standard Hours 600 returns x 4.6 hrs	-	Actual Hours =600 returns x 4.3 hrs	)	x	Standard Rate
(	2760	-	2580	)	x	$                        53.00
	9540
	Variance		$              9,540.00			Favourable-F