Question

Chhom corporation makes a product whose direct labor standards are 0.8 hours per unit and $34 per hour. In November the company produced 7,650 units using 5,620 direct labor-hours. The actual direct labor cost was $118,020. The labor efficiency variance for November is:

Answer 1

Answer:

$17,000 Favorable

Explanation:

Provided information, we have

Standard hours for each unit = 0.8 hours

Standard Rate per hour = $34

Actual quantity produced = 7,650 units

Actual labor hours used = 5,620

Actual rate per hour = $118,020/5,620 = $21 per hour

Standard hours for Actual output = 7,650 $\times$ 0.8 = 6,120 hours

Labor Efficiency Variance = (Standard Hours - Actual Hours) $\times$ Standard labor rate per hour

= (6,120 - 5,620) $\times$ $34

= $17,000 Favorable

As the amount is positive and actual hours used is less than standard hours the variance is favorable.