The Lennon Company uses a standard costing system and a flexible budget. At a normal level of activity of 15,000 units and 45,000 standard direct labor hours, the standard direct labor cost would be $270,000. During June, 44,950 hours were worked to produce 14,000 units at an actual direct labor cost of $352,000. The direct labor efficiency variance in June was
A) $25,700 (U).
B) $17,700 (U).
C) $17,700 (F).
D) $20,700 (U).

Question

Quizplus · Accepted Answer

The direct labor efficiency variance is calculated as (Actual Hours - Standard Hours) x Standard Rate. Standard Hours for 14,000 units = (14,000/15,000) x 45,000 = 42,000 hours. Standard Rate = $270,000 / 45,000 = $6 per hour. Efficiency Variance = (44,950 - 42,000) x $6 = $17,700 (Unfavorable).

The Lennon Company Uses a Standard Costing System and a Flexible