A job was budgeted to require 3 hours of labor per unit at $11.00 per hour.The job consisted of 8,000 units and was completed in 22,000 hours at a total labor cost of $269,500.What is the direct labor efficiency variance?
A)$27,500 unfavorable.
B)$22,000 unfavorable.
C)$16,000 unfavorable.
D)$22,000 favorable.
E)$6,000 unfavorable.

Question

Quizplus · Accepted Answer

The budgeted labor cost for the job = 3 hours per unit × $11.00 per hour = $33.00 per unit.
So, the budgeted total labor cost for 8,000 units = $33.00 per unit × 8,000 units = $264,000.
The actual labor cost for the job = $269,500.
So, the direct labor variance = Actual cost - Budgeted cost = $269,500 - $264,000 = $5,500 favorable.
The direct labor efficiency variance is calculated as:
Actual hours worked - Budgeted hours allowed × Standard labor rate
The budgeted hours allowed for the job = 3 hours per unit × 8,000 units = 24,000 hours.
So, the direct labor efficiency variance = 22,000 actual hours worked - 24,000 budgeted hours allowed × $11.00 standard rate per hour = $22,000 favorable. 
Therefore, the answer is D) $22,000 favorable.

A Job Was Budgeted to Require 3 Hours of Labor