Fletcher Company collected the following data regarding production of one of its products. Compute the direct labor efficiency variance. $\begin{array}{llr}
\text { Direct labor standard (2 hrs. @ \$12.75/hr.) } &\$25.50& \text { per finished unit } \
\text { Actual direct labor hours} &81,500& \text {hrs. } \
\text {Actual finished units produced } &40,000& \text {units } \
\text { Actual cost of direct labor } &\$1,100,250\
\end{array}$

A) $80,250 unfavorable.
B) $19,125 favorable.
C) $80,250 favorable.
D) $19,125 unfavorable.
E) $61,125 favorable.

Question

Fletcher Company collected the following data regarding production of one of its products. Compute the direct labor efficiency variance. $\begin{array}{llr}
  \text { Direct labor standard (2 hrs. @ \$12.75/hr.) } &\$25.50& \text { per finished unit } \
 \text {  Actual direct labor hours} &81,500& \text {hrs.  } \
 \text {Actual finished units produced  } &40,000& \text {units  } \
 \text { Actual cost of direct labor } &\$1,100,250\
\end{array}$

A) $80,250 unfavorable.
B) $19,125 favorable.
C) $80,250 favorable.
D) $19,125 unfavorable.
E) $61,125 favorable.

Quizplus · Accepted Answer

Direct labor efficiency variance = (Standard hours allowed for actual output - Actual hours worked) x Standard labor rate per hour
Standard hours allowed for actual output = Actual output x Standard hours per unit
Actual output = 7,500 units
Standard hours per unit = 3.5 hours per unit
Standard hours allowed for actual output = 7,500 x 3.5 = 26,250 hours
Actual hours worked = 27,000 hours
Standard labor rate per hour = $15
Direct labor efficiency variance = (26,250 - 27,000) x $15 = $19,125 unfavorable.

Fletcher Company Collected the Following Data Regarding Production of One