Landram Corporation makes a product with the following standard costs: In March the company produced 4,700 units using 10,230 kilos of the direct material and 2,210 direct labor-hours. During the month, the company purchased 10,800 kilos of the direct material at a cost of $76,680. The actual direct labor cost was $38,233 and the actual variable overhead cost was $11,934.

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 March is:
A)$2,660 F
B)$2,422 F
C)$2,422 U
D)$2,660 U

Question

Landram Corporation makes a product with the following standard costs:

In March the company produced 4,700 units using 10,230 kilos of the direct material and 2,210 direct labor-hours. During the month, the company purchased 10,800 kilos of the direct material at a cost of $76,680. The actual direct labor cost was $38,233 and the actual variable overhead cost was $11,934.

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 March is:

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 March is:
A)$2,660 F 
B)$2,422 F 
C)$2,422 U 
D)$2,660 U

Quizplus · Accepted Answer

SH = 4,700 units F1F1F1S1F1F1F10 0.5 hour per unit = 2,350 hours
Labor efficiency variance = (AH - SH)SR
= (2,210 hours - 2,350 hours)$19.00 per hour
= (-140 hours)$19.00 per hour = $2,660 F

Landram Corporation Makes a Product with the Following Standard Costs