Aztec Inc.'s standard labor cost of producing one unit of product is 2 hours at the rate of $14.00 per hour. During February 52000 hours of labor are incurred at a cost of $13.80 per hour to produce 25000 units of product.
Instructions
(a) Compute the labor price and labor quantity variances.
(b) Journalize the incurrence of the labor costs and the assignment of direct labor to production assuming a standard cost system is used.

Question

Nathaniel Jabati · Accepted Answer

Final Answer :  (a) Labor Price Variance: $ 717 , 600 ( 52 , 000 × $ 13.80 ) − $ 728 , 000 ( 52 , 000 × $ 14.00 ) = $ 10 , 400   F \frac { \$ 717,600 } { ( 52,000 \times \$ 13.80 ) } - \underset { ( 52,000 \times \$ 14.00 ) } { \$ 728,000 } = \$ 10,400 \mathrm {~F} ( 52 , 000 × $13.80 ) $717 , 600 ​ − ( 52 , 000 × $14.00 ) $728 , 000 ​ = $10 , 400   F Labor Quantity Variance $ 728 , 000 − $ 700 , 000 = $ 28 , 000 U ( 52 , 000 × $ 14.00 ) ( 50 , 000 × $ 14.00 ) \begin{array} { l } \$ 728,000 - \$ 700,000 = \$ 28,000 \mathrm { U } \( 52,000 \times \$ 14.00 ) \quad ( 50,000 \times \$ 14.00 ) \\end{array} $728 , 000 − $700 , 000 = $28 , 000 U ( 52 , 000 × $14.00 ) ( 50 , 000 × $14.00 ) ​ (b) Factory Labor.  728 , 000  Labor Price Variance 10 , 400  Factory Wages Payable  717 , 600  Work in Process Inventory  700 , 000  Labor Quantity Variance  28 , 000  Factory Labor  728 , 000 \begin{array}{llr}  \text {Factory Labor.   }  & 728,000\ \text {  Labor Price Variance}  & & 10,400\ \text { Factory Wages Payable  }  & & 717,600\\ \text { Work in Process Inventory }  & 700,000\ \text {   Labor Quantity Variance }  & 28,000\ \text { Factory Labor }  & & 728,000\\end{array} Factory Labor.   Labor Price Variance  Factory Wages Payable   Work in Process Inventory   Labor Quantity Variance   Factory Labor  ​ 728 , 000 700 , 000 28 , 000 ​ 10 , 400 717 , 600 728 , 000 ​

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