The following labour standards have been established for a particular product:
$\begin{array}{|l|r|}
\hline \text { Standard labour hours per unit of output } & 8.3 \text { hours } \
\hline \text { Standard labour rate } & \$ 12.10 \text { per hour } \
\hline
\end{array}$
The following data pertain to operations concerning the product for the last month:
$\begin{array}{|l|r|}
\hline \text { Actual hours worked } & 6,100 \text { hours } \
\hline \text { Actual total labour cost } & \$ 71,370 \
\hline \text { Actual output } & 900 \text { units } \
\hline
\end{array}$
What was the labour efficiency variance for the month?
A) $16,029 favourable.
B) $16,577 favourable.
C) $19,017 favourable.
D) $19,017 unfavourable.

Question

Quizplus · Accepted Answer

The labour efficiency variance is calculated as the difference between the standard labour hours for actual production and the actual hours worked, multiplied by the standard rate. The standard hours for the actual output are $900 \text{ units} \times 8.3 \text{ hours/unit} = 7,470 \text{ hours}$. The actual hours worked are 6,100 hours. The difference is $7,470 \text{ hours} - 6,100 \text{ hours} = 1,370 \text{ hours}$. The standard rate is $12.10 per hour. Therefore, the labour efficiency variance is $1,370 \text{ hours} \times \$12.10/\text{hour} = \$16,577$ favourable, because the actual hours worked are less than the standard hours for the actual output.

The Following Labour Standards Have Been Established for a Particular