Polaco Corporation makes a product that has the following direct labor standards: In May the company produced 8,500 units using 3,220 direct labor-hours. The actual direct labor rate was $22.10 per hour.
The labor efficiency variance for May is:
A) $3,978 F
B) $4,320 F
C) $4,320 U
D) $3,978 U

Question

Polaco Corporation makes a product that has the following direct labor standards:  In May the company produced 8,500 units using 3,220 direct labor-hours. The actual direct labor rate was $22.10 per hour.
The labor efficiency variance for May is:
A) $3,978 F 
B) $4,320 F 
C) $4,320 U 
D) $3,978 U

Quizplus · Accepted Answer

SH = 8,500 units × 0.4 hours per unit = 3,400 hours
Labor efficiency variance = (AH − SH) × SR
= (3,220 hours − 3,400 hours) × $24.00 per hour
= (−180 hours) × $24.00 per hour
= $77,280 − $81,600
= $4,320 F

Polaco Corporation Makes a Product That Has the Following Direct