Question

Chhom Corporation makes a product whose direct labor standards are 0.9 hours per unit and $30 per hour. In November the company produced 7,450 units using 6,205 direct labor-hours. The actual direct labor cost was $130,305. The labor efficiency variance for November is:

Answer 1

The labor efficiency variance for Chhom Corporation in November is a favorable variance of $15,000. This is found by calculating the standard labor hours for the actual production, subtracting the actual labor hours used, and multiplying the result by the standard labor rate.

Step-by-step explanation:

The labor efficiency variance for November at Chhom Corporation is calculated by comparing the standard labor hours for actual production to the actual labor hours used and then multiplying the difference by the standard labor rate. The standard hours for the actual production are determined by multiplying the number of units produced by the standard hours per unit. The labor efficiency variance helps the company assess how effectively it controls the amount of labor hours used in production.

First, we calculate the standard labor hours for the actual production:

• 7,450 units × 0.9 hours/unit = 6,705 standard hours

Now we find the difference between the standard labor hours and the actual labor hours:

• 6,705 standard hours - 6,205 actual hours = 500 favorable hours

Finally, multiply the difference by the standard labor rate to find the labor efficiency variance:

• 500 hours × $30/hour = $15,000 favorable variance