Question

Madrid Co. has a direct labor standard of 4 hours per unit of output. Each employee...

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

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Answer #1

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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