Perfect Builders constructs houses. The standard labour rate is $20 per hour, and the standard number of hours is 12,000 hours per home. During the year, it constructed 10 homes using 14,000 labour hours per home and a rate of $22 per hour.
-Refer to the Figure.What was the labour efficiency variance?
A)$400,000 U
B)$400,000 F
C)$440,000 U
D)$440,000 F

Question

Quizplus · Accepted Answer

The labour efficiency variance is calculated as (Actual hours - Standard hours) x Standard rate. Here, (14,000 hours - 12,000 hours) x $20 = 2,000 hours x $20 = $40,000 per home. For 10 homes, $40,000 x 10 = $400,000 Unfavorable (U).

Perfect Builders Constructs Houses