Question

Marv Company's direct labor costs for manufacturing its only product were as follows for October: Standard...

Marv Company's direct labor costs for manufacturing its only product were as follows for October:

Standard direct labor hours (DLHs) per unit of product 2
Budgeted finished units for the period 7,300
Actual number of finished units produced 5,800
Standard wage rate per direct labor hour (SP) $ 22.00
Direct labor costs incurred $ 260,000
Actual wage rate per direct labor hour (AP) $ 20.00

The direct labor efficiency variance for October, rounded to the nearest dollar, was:

Multiple Choice

  • $2,800 unfavorable.

  • $19,200 favorable.

  • $26,000 favorable.

  • $30,800 unfavorable.

  • $50,000 unfavorable.

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Answer #1

Answer :

$30,800 unfavorable.

Explanation:

Actual hours worked = Direct labor costs incurred / Actual wage rate per direct labor hour

= $260,000 / $20 = 13,000 DLHs

Standard hours allowed = Actual number of finished units produced * Standard direct labor hours (DLHs) per unit

= 5,800 * 2 DLHs = 11,600 DLHs

Direct labor efficiency variance = (Actual hours worked - Standard hours allowed) * Standard wage rate per direct labor hour

= (13,000 DLHs - 11,600 DLHs) * $22 = $30,800 unfavorable

Since actual hours worked is more than standard hours allowed, the resultant direct labor efficiency variance is unfavorable.

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