Question

The following labor standards have been established for a particular product:

Standard labor-hours per unit of output		9.1	hours
Standard labor rate	$	12.90	per hour

The following data pertain to operations concerning the product for the last month:

Actual hours worked		6,900	hours
Actual total labor cost	$	86,250
Actual output		900	units

What is the labor efficiency variance for the month?

Multiple Choice

$16,125 F

$19,401 U

$19,401 F

$16,641 F

Answer 1

Direct Labor Efficiency Variance is the measure of difference between the standard cost of actual number of direct labor hours utilized

during a period and the standard hours of direct labor for the level of output achieved.

Direct labor efficiency variance = [Actual labor hours * standard labor rate] - [Standard labor hours * standard labor rate]

Actual labor hours = 6900 hours

Standard labor rate = $12.90 per hour

Standard labor hours = Actual output * Standard labor-hours per unit of output = 900 units * 9.1 hours = 8190 hours

Direct labor efficiency variance = [6900 hours * $12.90] - [8190 * $12.90]

Direct labor efficiency variance = $16641 F