Arrow Industries uses a standard cost system in which direct materials inventory is carried at standard cost. Arrow has established the following standards for the prime costs of one unit of product. During May, Arrow purchased 160,000 pounds of direct material at a total cost of $304,000. The total direct labor wages for May were $37,800. Arrow manufactured 19,000 units of product during May using 142,500 pounds of direct material and 5,000 direct labor-hours.
-The direct labor efficiency variance for May is:
A)$2,200 favorable
B)$2,000 favorable
C)$2,000 unfavorable
D)$1,800 unfavorable

Question

Arrow Industries uses a standard cost system in which direct materials inventory is carried at standard cost. Arrow has established the following standards for the prime costs of one unit of product.  During May, Arrow purchased 160,000 pounds of direct material at a total cost of $304,000. The total direct labor wages for May were $37,800. Arrow manufactured 19,000 units of product during May using 142,500 pounds of direct material and 5,000 direct labor-hours.
-The direct labor efficiency variance for May is:
A)$2,200 favorable 
B)$2,000 favorable 
C)$2,000 unfavorable 
D)$1,800 unfavorable

Quizplus · Accepted Answer

SH = 19,000 units F1F1F1S1F1F1F10 0.25 hour per unit = 4,750 hours
Labor efficiency variance = (AH - SH)SR
= (5,000 hours - 4,750 hours)$8 per hour
= (250 hours)$8 per hour = $2,000 U

Arrow Industries Uses a Standard Cost System in Which Direct