Moreland Manufacturing Inc.
US-based Moreland Manufacturing Inc. produces and sells stainless steel faucets. In the current year, the company had budgeted for the production and sale of 6000 faucets but, due to unexpected demand, 7000 faucets were actually produced and sold. Each faucet has a standard requiring 15 ounces of direct material at a cost of $.40 per ounce and 15 minutes of assembly time at a cost of $.20 per minute. Actual costs for the production of 7000 faucets were $41 359.50 for materials (106 050 ounces purchased and used @ $.39 per ounce) and $21 560 for labour (98 000 minutes @ $.22 per minute).
-Moreland's direct labour efficiency variance is:
A) $1600 U
B) $1400 F
C) $2100 U
D) $2100 F

Question

Quizplus · Accepted Answer

The direct labour efficiency variance is calculated as (Actual hours - Standard hours) x Standard rate. Standard hours for 7000 faucets = 7000 x 15 = 105,000 minutes. Actual hours = 98,000 minutes. Standard rate = $0.20 per minute. Variance = (98,000 - 105,000) x $0.20 = -7,000 x $0.20 = $1,400 Favourable (F).

Moreland Manufacturing Inc. US-Based Moreland Manufacturing Inc. Produces and Sells Stainless Steel Faucets