Grant Manufacturing uses a standard cost system with overhead applied based on direct labor hours. The manufacturing budget for the production of 5,000 units for the month of May included the following information.
During May, 4,500 units were actually produced and the direct labor efficiency variance was $1,500 unfavorable.
Required:
Compute the actual number of direct labor hours that were used in May.

Question

Grant Manufacturing uses a standard cost system with overhead applied based on direct labor hours. The manufacturing budget for the production of 5,000 units for the month of May included the following information.
  During May, 4,500 units were actually produced and the direct labor efficiency variance was $1,500 unfavorable.
Required:
Compute the actual number of direct labor hours that were used in May.

Quizplus · Accepted Answer

The Answer is
Since the efficiency variance is $1,500 U, we can write the following equation:
$1,500 = ($15 x AH) - {$15 x [(10,000/5,000) x 4,500]} = ($15 x AH) - ($15 x 9,000)
Solving for AH yields 9,100 actual labor hours.

Grant Manufacturing Uses a Standard Cost System with Overhead Applied