Question

Hassock corporation produces woven wall hangings. It takes 3 hours of direct labor to produce a single wall hanging. Hassock's standard labor cost is 14 per hour. During August, Hassock produced 13,800 units and used 42,150 hours of direct labor at a total cost of586,800. What is Hassock's labor efficiency variance for August?

Answer 1

Hassock corporation's labor efficiency variance for August is calculated by comparing the standard hours expected to produce the units to the actual hours used, multiplied by the standard cost per hour.

Step-by-step explanation:

The student is asking for the calculation of Hassock corporation's labor efficiency variance for the month of August. To calculate this, we start with the standard amount of labor needed to produce the units, which is established at 3 hours per unit. With 13,800 units produced, the expected hours of labor would be 13,800 units × 3 hours/unit = 41,400 hours. The standard labor cost per hour is $14, making the expected total labor cost 41,400 hours × $14/hour = $579,600.

The actual labor hours used were 42,150, at an actual total cost of $586,800. However, for variance analysis, we focus only on the hours, rather than the cost.

The labor efficiency variance is therefore based on the difference between the expected hours (41,400) and the actual hours (42,150) used, multiplied by the standard cost per hour. The calculation is (41,400 hours - 42,150 hours) × $14/hour = ($10,500). A negative variance indicates that more hours were spent than expected, which is considered unfavorable.