The following data relates to QA firm:
Cost standards:
Actual results:
7 800 units were produced:
Calculate the labour efficiency variance.

A) $8000 (
B) $8000 (
C) $8250 (
D) $8250 (

Question

The following data relates to QA firm:
Cost standards:
Actual results:
7 800 units were produced:
Calculate the labour efficiency variance.

A) $8000 (
B) $8000 (
C) $8250 (
D) $8250 (

Quizplus · Accepted Answer

Labour efficiency variance is calculated by multiplying the standard labor rate by the difference between standard hours allowed for actual output and actual hours worked, i.e. (Standard hours - Actual hours) x Standard labor rate.

Standard hours for 7,800 units = 7,800 x 2 = 15,600 hours 
Actual hours worked = 8,000 hours

Therefore, labor efficiency variance = (15,600 - 8,000) x $0.50 = $8,250 (U)

Option C is the correct answer as it represents the actual labor efficiency variance. Option A and B are both incorrect, as the variance cannot be both favorable and unfavorable. Option D is also incorrect as it represents the labor rate variance, not the labor efficiency variance.

The Following Data Relates to QA Firm