Miolen Corporation has provided the following data concerning its direct labor costs for June: The Labor Efficiency Variance for June would be recorded as a:
A)credit of $50,128.
B)debit of $46,272.
C)debit of $50,128.
D)credit of $46,272.

Question

Miolen Corporation has provided the following data concerning its direct labor costs for June:  The Labor Efficiency Variance for June would be recorded as a:
A)credit of $50,128. 
B)debit of $46,272. 
C)debit of $50,128. 
D)credit of $46,272.

Quizplus · Accepted Answer

The Labor Efficiency Variance is calculated as (Standard Hours - Actual Hours) x Standard Rate. From the provided data, the Standard Hours for June are 55,000 (50,000 units x 1.1 hours per unit) and the Actual Hours are 54,000. Therefore, the Labor Efficiency Variance is (55,000 - 54,000) x $28.80 = $28,800 (favorable). This variance is recorded as a debit because it is favorable to the company, which means that the actual hours worked were less than the standard hours allowed for the output achieved. The debit would be for the full amount of the variance, which is $28,800. Adding this debit to the Direct Labor account would result in a total debit of $78,928 ($50,128 + $28,800).

Miolen Corporation Has Provided the Following Data Concerning Its Direct