Question

The following information describes a​ company's usage of direct labor in a recent​ period: Actual direct labor hours used 40 comma 000 Actual rate per hour $ 12.00 Standard rate per hour $ 11.25 Standard hours for units produced 27 comma 500 How much is the direct labor efficiency​ variance? A. $ 150 comma 000 favorable B. $ 150 comma 000 unfavorable C. $ 140 comma 625 unfavorable D. $ 140 comma 625 favorable

Answer 1

C. $ 140 comma 625 unfavorable

Step-by-step explanation:

The formula to compute the direct labor efficiency variance is shown below:

= Standard labor rate × (Standard hours for actual output - Actual hours)

where,

Standard labor rate is $11.25

Standard hours for actual output is 27,500

And, actual hour is 40,000

Now put these values to the above formula

So, the value would equal to

= $11.25 × (27,500 hours - 40,000 hours)

= $140,625 unfavorable

Since actual hours is more than the standard hours so there is a unfavorable variance