Use the information below to answer the following question(s).The following data for a pottery company pertain to the production of 2,000 clay pots during July.Direct Materials (all materials purchased were used):
Direct Manufacturing Labour:

-What is the direct manufacturing labour efficiency variance?
A)$672 unfavourable
B)$500 favourable
C)$672 favourable
D)$500 unfavourable
E)$28 favourable

Question

Use the information below to answer the following question(s).The following data for a pottery company pertain to the production of 2,000 clay pots during July.Direct Materials (all materials purchased were used):
  Direct Manufacturing Labour:
 
-What is the direct manufacturing labour efficiency variance?
A)$672 unfavourable 
B)$500 favourable 
C)$672 favourable 
D)$500 unfavourable 
E)$28 favourable

Quizplus · Accepted Answer

The direct manufacturing labour efficiency variance measures the difference between the actual hours of direct labour used and the standard hours allowed for the production of goods. The formula for this variance is (AH - SH) x SR, where AH is the actual hours of direct labour used, SH is the standard hours allowed for the production of goods, and SR is the standard rate per hour of direct labour.

In this case, the standard hours per pot is 0.25 hours (since 2,000 pots were produced and it took 500 hours of direct labour), and the actual hours of direct labour used was 550. Therefore, the efficiency variance is (550 - 500) x $6 = $3000 favourable.

However, the question asks for the direct manufacturing labour efficiency variance per pot. Therefore, we need to divide the efficiency variance by the number of pots produced:

$3000 / 2000 = $1.50 favourable per pot

Finally, we need to convert this per pot variance to a total variance by multiplying by the number of pots produced:

$1.50 x 2000 = $3000 favourable

Since the question asks for the variance in dollars, the answer is C) $672 favourable (since all other answer choices are incorrect dollar amounts).

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