Question

Annapolis Company completes job #601 which has a standard of 500 labor hours at a standard rate of $20.00 per hour. The job was completed in 590 hours and the average actual labor rate was $19.90 per hour. What is the labor efficiency (quantity) variance? A negative number indicates an favorable variance and a positive number indicates an unfavorable variance.

Answer 1

The labor efficiency variance is calculated by multiplying the difference between actual hours worked and standard hours allowed by the standard rate. In this case, the variance is an unfavorable $1,800, as it took 90 hours more than the standard to complete the job.

Step-by-step explanation:

To calculate the labor efficiency variance, we need to compare the actual hours worked to the standard hours allowed for the completed work, multiplied by the standard rate. The formula for labor efficiency variance is:

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

Let's apply this to the given problem:

• Standard Hours for Job #601 = 500 hours
• Standard Rate = $20.00 per hour
• Actual Hours worked = 590 hours
• Actual Rate (irrelevant for efficiency variance) = $19.90 per hour

We then calculate the variance:

Labor Efficiency Variance = (590 hours - 500 hours) x $20.00 per hour

Labor Efficiency Variance = 90 hours x $20.00 per hour

Labor Efficiency Variance = $1,800 unfavorable

Since the actual hours worked (590) are more than the standard hours (500), this results in an unfavorable variance, which means that the labor was less efficient than expected.

Answer 2

$1,800 Unfavorable

Step-by-step explanation:

Data given

Actual hours = 590

Standard hours = 500

Standard rate per hour = $20.00

The computation of labor efficiency (quantity) variance is shown below:-

Labor efficiency variance = (Actual hours - Standard hours) × Standard rate per hour

= (590 - 500) × $20.00

= 90 × $20.00

= $1,800 Unfavorable

Therefore for computing the Labor efficiency variance we simply applied the above formula.