Question

Minmax Co.'s direct labor information for February is as follows: Direct labor hours worked (AQ) 35,600 Standard direct labor hours for units manufactured (SQ) 38,000 Unfavorable direct labor rate variance $ 17,800 Total payroll for direct labor $ 427,200 The direct labor efficiency variance in February (to the nearest dollar) was:

Answer 1

$27,600 unfavorable

Step-by-step explanation:

In order to calculated labor efficiency variance which is standard cost of actual hours less standard cost, first compute standard rate as shown below:

Unfavorable direct labor rate variance = $17,800

Unfavorable direct labor rate variance = Actual rate - standard rate × Actual hours

Actual rate = Total payroll for direct labor ÷ Direct labor hours (AQ)

= 427,200 ÷ 35,600

= $12 per unit

Substituting the values in the above formula:

17,800 = (12 - SR) × 35,600

SR = $11.5

Now calculate Standard cost of actual hours = Direct labor hours × SR

= 35,600 × 11.5

= $409,400

Standard cost = Standard direct hours × SR

= 38,000 × 11.5

= $437,000

Direct labor efficiency variance = Standard actual of actual hours - Standard cost

= 409,400 - 437,000

= - $27,600 or $27,600 unfavorable