A product's standard cost card specifies that a unit of the product requires 4 direct labor-hours. During September, 3,350 units were made, which was 150 units less than budgeted. The total budgeted direct labor cost for September was $117,600. The direct labor cost incurred during September was $111,850 and 13,450 direct labor-hours were worked.The labor efficiency variance for the month was:
A) $420.00 Unfavorable
B) $420.00 Favorable
C) $415.80 Unfavorable
D) $415.80 Favorable

Question

Quizplus · Accepted Answer

The labor efficiency variance is calculated as the difference between the actual direct labor cost and the standard direct labor cost. The standard direct labor cost is calculated as the standard direct labor-hours per unit multiplied by the actual number of units produced. The actual direct labor cost is the actual direct labor-hours worked multiplied by the actual direct labor rate.In this case, the standard direct labor-hours per unit is 4, the actual number of units produced is 3,350, the actual direct labor-hours worked is 13,450, and the actual direct labor rate is $111,850 / 13,450 = $8.31.Therefore, the standard direct labor cost is 4 * 3,350 * $8.31 = $111,420. The actual direct labor cost is 13,450 * $8.31 = $111,850. The labor efficiency variance is $111,850 - $111,420 = $420.00 unfavorable.

A Product's Standard Cost Card Specifies That a Unit of the Product