Dexter Surgical Tools has set the following direct labour standard: 0.5 hours at $20 per hour, for each unit of Tool #11. The company plans to produce 1200 units of Tool #11 in July; however, the actual production was 1000 units and only 900 units were actually sold. The actual labour cost for July was $22 per hour.
Which of the following is a likely explanation for the July labour efficiency variance?
A) The standard was set incorrectly.
B) A machine breakdown has resulted in unanticipated inefficiencies.
C) The production level was smaller than expected.
D) Both incorrectly set standards and a machine breakdown are likely explanations.

Question

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The Answer of Dexter Surgical Tools has set the following direct labour standard: 0.5 hours at $20 per hour, for each unit of Tool #11. The company plans to produce 1200 units of Tool #11 in July; however, the actual production was 1000 units and only 900 units were actually sold. The actual labour cost for July was $22 per hour.
Which of the following is a likely explanation for the July labour efficiency variance?
A) The standard was set incorrectly.
B) A machine breakdown has resulted in unanticipated inefficiencies.
C) The production level was smaller than expected.
D) Both incorrectly set standards and a machine breakdown are likely explanations.

Dexter Surgical Tools Has Set the Following Direct Labour Standard