Question

Ramona Company has the following labor-related data. Standard labor hours for output: 15,000 hours Standard labor rate: $10 per hour Actual labor rate: $8 per hour Actual labor hours: 17,500 hours Given this information, the labor EFFICIENCY variance is

Answer 1

$25,000 Unfavourable

Step-by-step explanation:

The labor Efficiency variance = ( Actual labor Hrs × Standard rate) - ( Standard labor Hr × Standard rate)

= ( 17500 × 10) (15000 × 10)

= 175000 - 150000

= $25,000 Unfavourable

Provided that the standard cost of actual labor hour is greater than the standard labor cost. Then, the variable is unfavorable.