The following labour standards have been established for a particular product:
The following data pertain to operations concerning the product for the last month:
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

The following labour standards have been established for a particular product: 
The following data pertain to operations concerning the product for the last month: 
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.

Quizplus · Accepted Answer

To calculate the labour efficiency variance, we need to multiply the actual hours of labour worked by the standard rate and subtract the standard hours of labour allowed for the actual output achieved, multiplied by the standard rate.

Actual hours worked = 9,000 
Standard rate per hour = $8.50 
Standard hours allowed = 10,000 
Actual output achieved = 1,000 units 
Standard hours allowed for actual output achieved = 1,100

Labour efficiency variance = (Actual hours worked x Standard rate) - (Standard hours allowed for actual output x Standard rate)
= (9,000 x $8.50) - (1,100 x $8.50)
= $76,500 - $9,350
= $67,150

Since the actual hours worked were less than the standard hours allowed for actual output achieved, the labour efficiency variance is favourable.

Therefore, the answer is B) $16,577 favourable.

The Following Labour Standards Have Been Established for a Particular