Question

Justin Time Guitars manufactures electric guitars. The following data relate to the standards for direct​ labor: Standard direct labor hours per guitar Standard direct labor rate per hour Justin Time had the following actual results for​ March: Actual direct labor hours Actual total direct labor cost Actual number of guitars produced What is the direct labor efficiency variance for​ March?

Answer 1

Question

Justin Time Guitars manufactures electric guitars. The following data relate to the standards for direct​ labor: Standard direct labor hours per guitar Standard direct labor rate per hour Justin Time had the following actual results for​ March: Actual direct labor hours Actual total direct labor cost Actual number of guitars produced What is the direct labor efficiency variance for​ March?

standard Ditect labour hour      3.5

Standard direct labour rate     $17

Actual direct labour hour           650

Actual direct labour cost        26200

Actual number of guitars produced - 525

Answer

  Efficiency variance      =$20,187.5

Explanation

Labour efficiency variance is the difference between the actual time taken to achieve a given production output less the standard hours allowed for same multiplied by the standard labour rate

                                                                                       Hours

525 units should have taken (525×  3.5)   =              1,837.5

but did take                                                                      650    

efficiency variance (hours)                                             1187.5  favorable

standard labor rate                                                   ×   $ 17

Efficiency variance  ($)                                            $20,187.5  favorable

  Efficiency variance      =$20,187.5