Question

We expect to pay our employees $20 per hour and spend 3 hours building a computer. We build 100 computers using a total of 400 hours and paying total wages of $10,000. Our Labor Efficiency Variance would be:
A. $2,500 unfavorable

B. $2,000 unfavorable

C. $2,500 favorable

D. $2,000 favorable

part 2

We expect to pay our employees $20 per hour and spend 3 hours building a computer. We build 100 computers using a total of 400 hours and paying total wages of $10,000. Our Total Labor Variance would be:

Select one:

A. $2,000 unfavorable

B. $4,000 unfavorable

C. $2,000 favorable

D. $4,000 favorable

part 3

We expect to use 8 pounds of material in making a computer. Each pound of Material is expected to cost $5. We produce 100 units that use 7 pounds of material that cost $6 per pound. The Total Materials Variance would be:

Select one:

A. $2,000 favorable

B. $200 favorable

C. $200 unfaborable

D. $2,000 unfavorable

Answer 1

1) Labour efficiency variance = (Standard hour-actual hour)Standard rate

                                               = (100*3-400)*20

Labour efficiency variance = 2000 Unfavorable

So answer is b) $2000 Unfavorable

2) Total labour variance = (100*3*20)-10000 = 4000 Unfavorable

So answer is b) $4000 Unfavorable

3) Total material variance = (100*8*5)-(100*7*6) = 200 Unfavorable

So answer is c) $200 Unfavorable