Capizzi Corporation has provided the following data concerning its direct labor costs for February:
The Labor Efficiency Variance for February would be recorded as a:
A) debit of $45,562.
B) credit of $45,562.
C) debit of $44,726.
D) credit of $44,726.

Question

Capizzi Corporation has provided the following data concerning its direct labor costs for February: 
The Labor Efficiency Variance for February would be recorded as a:
A) debit of $45,562. 
B) credit of $45,562. 
C) debit of $44,726. 
D) credit of $44,726.

Quizplus · Accepted Answer

Labor Efficiency Variance is calculated as (Standard Hours Allowed for Actual Output – Actual Hours Worked) x Standard Rate per Hour.

In this case, the actual hours worked were 405,000 and the standard allowed hours for actual output were 390,000. Thus, the labor efficiency variance would be (390,000-405,000) x $0.116 = -$1,740. Therefore, we need to record a debit to adjust for the unfavorable variance.

Hence, the correct answer is option C, a debit of $44,726.

Capizzi Corporation Has Provided the Following Data Concerning Its Direct