Dirickson Inc. has provided the following data concerning one of the products in its standard cost system. Variable manufacturing overhead is applied to products on the basis of direct labor-hours. The company has reported the following actual results for the product for July:
The labor efficiency variance for the month is closest to:
A) $1,080 F
B) $1,176 F
C) $1,080 U
D) $1,176 U

Question

Dirickson Inc. has provided the following data concerning one of the products in its standard cost system. Variable manufacturing overhead is applied to products on the basis of direct labor-hours.  The company has reported the following actual results for the product for July:
 The labor efficiency variance for the month is closest to:
A) $1,080 F 
B) $1,176 F 
C) $1,080 U 
D) $1,176 U

Quizplus · Accepted Answer

SH = 7,600 units × 0.10 hours per unit = 760 hours
Labor efficiency variance = (AH × SR) - (SH × SR)
= (AH - SH) × SR
= (820 hours - 760 hours) × $18.00 per hour
= (60 hours) × $18.00 per hour
= $1,080 U