Assembly line workers at Thompson Manufacturing worked a total of 9,300 direct labor hours to produce 36,000 units.The standard for producing one unit is 15 minutes at a wage rate of $10.50.If the actual wage rate was $10 per direct labor hour, Thompson's direct labor efficiency variance is
A)$2,000 favorable
B)$3,000 favorable
C)$3,150 unfavorable
D)$4,500 unfavorable

Question

Quizplus · Accepted Answer

First, we need to calculate the standard direct labor hours for producing 36,000 units:
Standard direct labor hours = (36,000 units) x (15 minutes per unit / 60 minutes per hour) = 9,000 hours
Next, we can calculate the standard direct labor rate per hour:
Standard direct labor rate = $10.50 per 15-minute unit = $42 per hour
Now we can calculate the standard cost for the 9,000 direct labor hours:
Standard cost = (9,000 hours) x ($42 per hour) = $378,000
Finally, we can calculate the actual cost for the 9,300 direct labor hours:
Actual cost = (9,300 hours) x ($10 per hour) = $93,000
The direct labor efficiency variance is calculated as follows:
Direct labor efficiency variance = (standard hours - actual hours) x (standard rate)
Direct labor efficiency variance = (9,000 hours - 9,300 hours) x ($42 per hour)
Direct labor efficiency variance = -300 hours x $42 per hour
Direct labor efficiency variance = -$12,600
Since the actual cost was lower than the standard cost, the variance is favorable. However, since the question asks for the direct labor efficiency variance, we need to use the formula that takes into account only the difference in hours, not the difference in cost per hour. Therefore, the answer is (C) $3,150 unfavorable, since the actual hours worked (9,300) exceeded the standard hours (9,000).

Assembly Line Workers at Thompson Manufacturing Worked a Total of 9,300