Question
Stuarts Doll Company produces handmade dolls. The standard amount of time spent on each doll is 1.50 hours. The standard cost of labor is $7.66
Stuarts Doll Company produces handmade dolls. The standard amount of time spent on each doll is 1.50 hours. The standard cost of labor is $7.66 per hour. The company planned to make 8,400 dolls during the year but actually used 13,100 hours of labor to make 9,400 dolls. The payroll amounted to $105,324.
Required
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Should labor variances be based on the planned volume of 8,400 dolls or the actual volume of 9,400 dolls?
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Prepare a table that shows the standard labor price, the actual labor price, the standard labor hours, and the actual labor hours.
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Compute the labor price variance and indicate whether it is favorable (F) or unfavorable (U).
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Compute the labor usage variance and indicate whether it is favorable (F) or unfavorable (U).
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