Madrid Co.has a direct labor standard of 4 hours per unit of output.Each employee has a standard wage rate of $11 per hour.During February,Madrid Co.paid $99,500 to employees for 9,150 hours worked.2,400 units were produced during February.What is the direct labor efficiency variance?
A)$1,150 favorable
B)$4,950 favorable
C)$6,100 favorable
D)$302 favorable

Question

Quizplus · Accepted Answer

First, we need to calculate the total hours of direct labor that should have been used for the production of 2,400 units:

2,400 units × 4 hours per unit = 9,600 hours

Since the actual hours worked were 9,150, there is an unfavorable direct labor efficiency variance of:

9,150 actual hours – 9,600 standard hours = 450 unfavorable hours

Now we need to convert this to a dollar amount using the standard wage rate:

450 unfavorable hours × $11 per hour = $4,950 unfavorable variance

Therefore, the answer is B, $4,950 favorable (since the question asks for the efficiency variance, not the actual variance).

Madrid CoHas a Direct Labor Standard of 4 Hours Per Unit