Jackson Industries uses a standard cost system in which direct materials inventory is carried at standard cost. Jackson has established the following standards for one unit of product.

During May, Jackson purchased 125,000 pounds of direct material at a total cost of $475,000. The total factory wages for May were $364,000, 90 percent of which were for direct labor. Jackson manufactured 22,000 units of product during May using 108,000 pounds of direct material and 28,000 direct labor-hours.
-The labor efficiency variance for May is:
A)$5,850 Favorable
B)$7,200 Favorable
C)$6,000 Unfavorable
D)$5,850 Unfavorable

Question

Jackson Industries uses a standard cost system in which direct materials inventory is carried at standard cost. Jackson has established the following standards for one unit of product.

During May, Jackson purchased 125,000 pounds of direct material at a total cost of $475,000. The total factory wages for May were $364,000, 90 percent of which were for direct labor. Jackson manufactured 22,000 units of product during May using 108,000 pounds of direct material and 28,000 direct labor-hours.
-The labor efficiency variance for May is:
A)$5,850 Favorable 
B)$7,200 Favorable 
C)$6,000 Unfavorable 
D)$5,850 Unfavorable

Quizplus · Accepted Answer

The labor efficiency variance is calculated as the difference between the actual labor hours used and the standard labor hours allowed for the output achieved, multiplied by the standard hourly wage rate. The equation for labor efficiency variance is (AH-SH) x SR, where AH is actual hours, SH is standard hours, and SR is standard rate. Given the information in the problem, we can calculate the labor efficiency variance as:
(21,800 - (13,500/7)) x $10 = $6,000 unfavorable. Therefore, the correct answer is C, $6,000 unfavorable.

Jackson Industries Uses a Standard Cost System in Which Direct