Fluegge 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 December:
The labor efficiency variance for the month is closest to:
A) $3,604 U
B) $3,604 F
C) $3,502 F
D) $3,502 U

Question

Fluegge 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 December:
 The labor efficiency variance for the month is closest to:
A) $3,604 U 
B) $3,604 F 
C) $3,502 F 
D) $3,502 U

Quizplus · Accepted Answer

SH = 4,100 units × 0.70 hours per unit = 2,870 hours
Labor efficiency variance = (AH × SR) − (SH × SR)
= (AH - SH) × SR
= (2,700 hours - 2,870 hours) × $20.60 per hour
= (−170 hours) × $20.60 per hour
= $3,502 F