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)$25,700 (F).

Question

Quizplus · Accepted Answer

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

The Lennon Company Uses a Standard Costing System and a Flexible