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Calculating and explaining labor price and usage variances

Exercise 22-14A Calculating and explaining labor price and usage variances
Raman 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. Raman expected each Class 2 return to require 4.0 hours of labor at a cost of $50 per hour. The firm actually completed 600 returns. Actual labor hours averaged 4.4 hours per return and actual labor cost amounted to $46 per hour.

Required

a. Determine the total labor variance and indicate whether it is favorable (F) or unfavorable (U).
b. Determine the labor price variance and indicate whether it is favorable (F) or unfavorable (U).
c. Determine the labor usage variance and indicate whether it is favorable (F) or unfavorable (U).

Solution Preview

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** Please see the attached file for the complete solution response **

Direct Labour cost variance:

Standard hours allowed for actual output 4.0 hours for each class 2 return
Total standard hours allowed on actual production of 600 returns ...

Solution Summary

This solution provides a complete computation of the given problem formatted in Excel.

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