Question

Efficient Corporation uses a standard cost system. The following information was provided for the period that just ended: Actual price per gallon $11.75 Actual gallons of material used 5,000 Actual hourly labor rate $17.00 Actual hours of production 24,300 Standard price per gallon $12.00 Standard gallons per completed unit 1/2 Standard hourly labor rate $12.00 Standard time per completed unit 3 hrs. Units completed during the period 9,000 Refer to the information provided for Efficient Corporation. The total direct labor variance is:_________.

a) $216,000 favorable.
b) $32,400 favorable.
c) $89,100 unfavorable.
d) $121,500 unfavorable.

Answer 1

The option (c) $89,100 unfavorable is correct

Step-by-step explanation:

Solution

Recall that:

The actual price per gallon = $11.75

Actual gallons of material used= 5,000

Actual hourly labor rate= $17.00

Actual hours of production= 24,300

Standard price per gallon =$12.00

Rate of labor = $12.00

Now,

We find the total direct labor variance which is computed as follows:

Total Direct Labor Variance = Actual Direct Labor Cost - Standard Labor Cost

=24300*17 -3*9000*12

= 413,100 -32400

= -89,100 (unfavorable)

Therefore, the total direct labor variance is $89,100