Question

Krizun Industries makes heavy construction equipment. The standard for a particular crane calls for 28 direct labor-hours at $16 per direct labor-hour. During a recent period 1,700 cranes were made. The labor efficiency variance was $6,000 Unfavorable. How many actual direct labor-hours were worked?

Multiple Choice

53,600 direct labor-hours

47,600 direct labor-hours

47,975 direct labor-hours

45,900 direct labor-hours

Answer 1

C. 47,975 direct labor-hours

The labor rate variance of zero implies that the standard labor rate is equal to the actual labor rate of $16 per direct labor-hour.

Labor efficiency variance = (AH - SH) * SR

$6,000 U = [AH - (1,700 cranes * 28 hours per crane)] * $16 per hour

$6,000 = [AH - (1,700 cranes * 28 hours per crane)] * $16 per hour

$6,000 = [AH - (47,600 hours)] * $16 per hour

$6,000 = (AH * $16 per hour) - $761,600

AH * $16 per hour = $761,600 + $6,000

AH * $16 per hour = $767,600

AH = $767,600 / $16 per hour

AH = 47,975 direct labor-hours