Question

The following labor standards have been established for a particular product:

Standard labor-hours per unit of output 10.3 hours
Standard labor rate $14.10 per hour

The following data pertain to operations concerning the product for the last month:

Actual hours worked 8,100 hours
Actual total labor cost $110,970
Actual output 900 units

What is the labor efficiency variance for the month?

a. $16,029 F
b. $16,497 F
c. $19,737 F
d. $19,737 U

Answer 1

Answer:

Direct labor time (efficiency) variance= 16,497 favorable

Explanation:

Giving the following information:

Standard labor-hours per unit of output 10.3 hours

Standard labor rate $14.10 per hour

Actual hours worked 8,100 hours

Actual output 900 units

To calculate the direct labor efficiency variance, we need to use the following formula:

Direct labor time (efficiency) variance= (Standard Quantity - Actual Quantity)*standard rate

Standard quantity= 10.3*900= 9,270

Direct labor time (efficiency) variance= (9,270 - 8,100)*14.1

Direct labor time (efficiency) variance= 16,497 favorable