Biery Corporation makes a product with the following standard costs: The company produced 4,100 units in April using 5,380 liters of direct material and 2,610 direct labor-hours. During the month, the company purchased 6,000 liters of the direct material at $5.80 per liter. The actual direct labor rate was $19.80 per hour and the actual variable overhead rate was $2.90 per hour. The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.
The labor efficiency variance for April is:
A)$2,850 F
B)$2,850 U
C)$2,970 F
D)$2,970 U

Question

Biery Corporation makes a product with the following standard costs:  The company produced 4,100 units in April using 5,380 liters of direct material and 2,610 direct labor-hours. During the month, the company purchased 6,000 liters of the direct material at $5.80 per liter. The actual direct labor rate was $19.80 per hour and the actual variable overhead rate was $2.90 per hour. The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.
The labor efficiency variance for April is:
A)$2,850 F 
B)$2,850 U 
C)$2,970 F 
D)$2,970 U

Quizplus · Accepted Answer

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

Standard hours allowed for actual output:

4,100 units × 0.60 hours per unit = 2,460 standard hours

Labor efficiency variance:

Actual hours - Standard hours allowed × Standard rate

= (2,610 hours - 2,460 hours) × $20 per hour 
= $3,000 U

Therefore, the correct answer is B) $2,850 U.

Biery Corporation Makes a Product with the Following Standard Costs