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Labor Variance Formulas

The document discusses three types of labor variance formulas: total, price, and quantity. It provides the standard hours (SH) formula of actual units produced multiplied by hours required per unit. The total labor variance formula is actual hours multiplied by actual rate minus standard hours multiplied by standard rate. The price variance formula is actual hours multiplied by actual rate minus actual hours multiplied by standard rate. The quantity variance formula is actual hours multiplied by standard rate minus standard hours multiplied by standard rate. An example is provided to demonstrate how to calculate the amounts for the variance formulas.

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982 views2 pages

Labor Variance Formulas

The document discusses three types of labor variance formulas: total, price, and quantity. It provides the standard hours (SH) formula of actual units produced multiplied by hours required per unit. The total labor variance formula is actual hours multiplied by actual rate minus standard hours multiplied by standard rate. The price variance formula is actual hours multiplied by actual rate minus actual hours multiplied by standard rate. The quantity variance formula is actual hours multiplied by standard rate minus standard hours multiplied by standard rate. An example is provided to demonstrate how to calculate the amounts for the variance formulas.

Uploaded by

Mary
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF or read online on Scribd

Labor Variance Formulas Total, Price, and Quantity

AH = Actual Hours AR = Actual Rate SH = Standard Hours SR = Standard Rate F = Favorable is when the actual is lower than the standard. U = Unfavorable is when the actual is higher than the standard. Standard Hours (SH) Formula Actual Units Produced X Hours required per unit Step 1 (4,550 X 3.9) Step 2 = 17,745 Note: Actual Hours, Actual Rate, and Standard Rate will all be given to you in the problem. Total Labor Variance Formula (AH X AR) - (SH X SR) (17,900 X $8.30) - (17,745 X $8.50) $148,570- $150,833 = $2,263 F Labor Price Variance Formula (AH X AR) - (AH X SR) (17,900 X $8.30) - (17,900 X $8.50) $148,570 - $152,150 = $3,580F Labor Quantity Variance Formula (AH X SR) - (SH X SR) (17,900 X $8.50) - (17,745 X $8.50) $152,150 - $150,833 = $1,317U

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MJC 12/2012

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Labor Variance Formulas Total, Price, and Quantity


How to Determine Amounts for Variance Formulas Exercise Example: Morrison Pet Supply Companys standard labor cost of producing one unit of Product- A is 3.9 hours at the rate of $8.50 per hour. During August, 17,900 hours of labor are incurred at a cost of $8.30 per hour to produce 4,550 units of Product-A. AH = 17,900 Actual Hours to produce 4,550 units of Product-A AR = $8.30 Actual Rate per labor hour SH = (4,550 units of Product-A produced X 3.9 hours per unit) equals 17,745 hours of Standard Hours used to produce 4,550 units of Product-A. SR = $8.50 Standard Rate per labor hour

MJC 12/2012

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