Jackson Industries uses a standard cost system in which direct materials inventory is carried at standard cost. Jackson has established the following standards for one unit of product. During May, Jackson purchased 125,000 pounds of direct material at a total cost of $475,000. The total factory wages for May were $364,000, 90 percent of which were for direct labor. Jackson manufactured 22,000 units of product during May using 108,000 pounds of direct material and 28,000 direct labor-hours. The labor efficiency variance for May is:
A)$5,850 Favorable
B)$7,200 Favorable
C)$6,000 Unfavorable
D)$5,850 Unfavorable

Question

Jackson Industries uses a standard cost system in which direct materials inventory is carried at standard cost. Jackson has established the following standards for one unit of product.  During May, Jackson purchased 125,000 pounds of direct material at a total cost of $475,000. The total factory wages for May were $364,000, 90 percent of which were for direct labor. Jackson manufactured 22,000 units of product during May using 108,000 pounds of direct material and 28,000 direct labor-hours. The labor efficiency variance for May is:
A)$5,850 Favorable 
B)$7,200 Favorable 
C)$6,000 Unfavorable 
D)$5,850 Unfavorable

Quizplus · Accepted Answer

The labor efficiency variance measures the difference between the actual hours of direct labor used and the standard hours of direct labor allowed for the actual output, multiplied by the standard labor rate per hour.

Given data: 
Actual direct labor-hours used = 28,000
Direct labor efficiency variance = (standard labor hours for actual output - actual direct labor-hours used) x standard labor rate per hour

Standard labor hours for actual output = Number of units produced x Standard labor hours per unit, which is:
22,000 units x 1.2 hours per unit = 26,400 standard labor hours

Therefore, the direct labor efficiency variance is:
(26,400 - 28,000) x $15 per hour = $6,000 unfavorable

Hence, the correct answer is C) $6,000 Unfavorable.

Jackson Industries Uses a Standard Cost System in Which Direct