Discover Motor Company uses a standard cost system to collect costs related to the production of its toothpick motors. The direct labor standard for each toothpick motor is 1.25 hours at a standard cost of $9.50 per hour.
During the month of May, Discover's toothpick motor production used 5,900 direct labor-hours at a total direct labor cost of $54,575. This resulted in production of 4,800 toothpick motors for May. What is Discover's labor efficiency variance for the month of May?
A) $950 favorable
B) $1,475 favorable
C) $8,975 unfavorable
D) $10,450 unfavorable

Question

Quizplus · Accepted Answer

The labor efficiency variance is calculated as (Actual hours - Standard hours) x Standard rate. In this case, the actual hours are 5,900, the standard hours are 4,800 (1.25 hours per motor x 4,800 motors), and the standard rate is $9.50 per hour. Therefore, the labor efficiency variance is (5,900 - 4,800) x $9.50 = $950 favorable.

Discover Motor Company Uses a Standard Cost System to Collect