Madrid Co. has a direct labor standard of 4 hours per unit of output. Each employee has a standard wage rate of $13.00 per hour. During February, Madrid Co. paid $99,600 to employees for 9,240 hours worked. 2,480 units were produced during February. What is the direct labor efficiency variance?
$20,520 favorable
$29,360 favorable
$8,840 favorable
$19,672 favorable
Answer:
Option C: $ 8,840 Favorable
Explanation:
Given:
Standard Rate | $ 13.00 |
Standard hours | 9,920 |
Actual rate | $ 10.78 |
Actual hours | 9,240 |
Now,
Labor Efficiency Variance = | (Standard hours - Actual hours) * Standard rate |
Labor Efficiency Variance = | (9920 - 9240) * $ 13 |
Labor Efficiency Variance = | $ 8,840 Favorable |
Clearly, option c is correct and other options are incorrect.
In case of any doubt, please comment.
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