Question

The actual cost of direct labor per hour is $ 11.00 and the standard cost of direct labor per hour is $ 9.50. The direct labor hours allowed per finished unit is 0.25 hour. During the current​ period, 4 comma 900 units of finished goods were produced using 3 comma 000 direct labor hours. How much is the direct labor efficiency​ variance? A. $ 16 comma 862.50 favorable B. $ 19 comma 525.00 favorable C. $ 19 comma 525.00 unfavorable D. $ 16 comma 862.50 unfavorable

Answer 1

D. $ 16 comma 862.50 unfavorable

Step-by-step explanation:

The computation of the direct labor efficiency​ variance is shown below:

Direct labor efficiency variance is

= Standard rate × (Actual hours - standard hours)

= $9.50 × (3,000 direct labor hours - 4,900 units × 0.25 hours)

= $9.50 × (3,000 direct labor hours - 1,225 direct labor hours)

= $16,862.50 unfavorable

As actual hours is more than the standard hours which reflects the unfavorable variance and if actual hours is less than the standard hours then it would leads to favorable variance