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28 March, 15:42

Dillon has a standard of 2 hours of labor per unit, at $12 per hour. In producing 2,000 units, Dillon used 3,850 hours of labor at a total cost of $46,970. Dillon's total labor variance is

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  1. 28 March, 15:45
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    1,030 favorable

    Explanation:

    Data given

    Total cost = $46,970

    Labor hours = 3,850

    Standard hours = 2 hours per unit at $12 per hour

    The computation of total variance is shown below:-

    For computing the total variance first we need to find out the labor rate variance and labor efficiency variance

    Labor rate variance = (Actual rate - Standard rate) * Actual hours

    = ($46,970 : 3,850 - 12) * 3,850

    = (12.20 - $12) * 3850

    = $770 unfavorable

    Labor efficiency variance = (Standard hours - Actual hours) * standard rate

    = (2 * 2,000 - 3,850) * $12

    = (4,000 - 3,850) * $12

    = 150 * 12

    = $1,800 favorable

    Total labor variance = Labor price variance + labor quantity variance

    = 770 unfavorable + 1800 favorable

    = 1,030 favorable

    So, for computing the total variance we simply applied the above formula.
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