EKPN Co.produces wooden boxes.The company's standards per box require 6 boards, each costing $10 per board, and half of an hour of direct labour.The standard labour rate is $15 per hour.In August, EKPN Co.Purchased 12,000 boards for a total cost of $123,000.It used 11,500 boards to manufacture 1,900 boxes.Total labour hours were 1,000 hours, and total labour costs were $16,250. What was the total labour variance for August?

Question

Quizplus · Accepted Answer

The total labour variance is calculated by comparing the actual labour costs to the standard labour costs for the actual production. The standard labour cost per box is 0.5 hours * $15/hour = $7.5. For 1,900 boxes, the standard labour cost is 1,900 boxes * $7.5/box = $14,250. The actual labour cost is $16,250. Therefore, the total labour variance is $16,250 (actual) - $14,250 (standard) = $2,000 unfavorable, because the actual cost exceeded the standard cost.

EKPN CoProduces Wooden Boxes