Question

Tharaldson Corporation makes a product with the following standard costs: Standard Quantity or Hours Standard Price or Rate Standard Cost Per Unit Direct materials 5.8 ounces $ 3.00 per ounce $ 17.40 Direct labor 0.5 hours $ 12.00 per hour $ 6.00 Variable overhead 0.5 hours $ 5.00 per hour $ 2.50 The company reported the following results concerning this product in June. Originally budgeted output 3,800 units Actual output 3,400 units Raw materials used in production 20,800 ounces Purchases of raw materials 21,900 ounces Actual direct labor-hours 520 hours Actual cost of raw materials purchases $ 42,500 Actual direct labor cost $ 13,800 Actual variable overhead cost $ 3,900 The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. The labor efficiency variance for June is: rev: 10_25_2017_QC_CS-106922 Garrison 16e Rechecks 2017-10-31 Multiple Choice $14,160 F $16,560 U $14,160 U

Answer 1

$14,160 F

Step-by-step explanation:

The computation of the labor efficiency variance is shown below:

As we know that

Labor Efficiency Variance = (Standard Hours - Actual Hours) × Standard Rate

where,

Standard hours is

= 3,400 units × 0.5 hours

= 1,700 hours

And, the actual hours is 520 hours

And, the standard rate is $12

So, the labor efficiency variance is

= (1,700 hours - 520 hours) × $12

= $14,160 favorable

Since standard hours is more than the actual hours so it would lead to favorable variance