at a recent seminar you attended, the invited speaker was discussing some of the advantages and disadvantages of standard costs in terms of evaluating performance and motivating goal-congruent behavior on the part of employees. one criticism of standard costs in particular caught your attention: the use of conventional standard costs may not provide appropriate incentives for improvements needed to compete effectively with world-class organizations. the speaker then discussed so-called continuous-improvement standard costs. such standards embody systematically lower costs over time. for example, on a monthly basis, it might be appropriate to budget a 1.0% reduction in per-unit direct labor cost. assume that the standard wage rate into the foreseeable future is $21 per hour. assume, too, that the budgeted labor-hour standard for october of the current year is 2.60 hours and that this standard is reduced each month by 2%. during december of the current year the company produced 7,400 units of xl-10, using 20,500 direct labor hours. the actual wage rate per hour in december was $23.00. required: 1. prepare a table that contains the standard labor-hour requirement per unit and standard direct labor cost per unit for the 4 months, october through january. 2. compute the direct labor efficiency variance for december. was this variance favorable or unfavorable?
