Question
Ravena Labs., Inc. makes a single product which has the following standards:
Direct materials: 2.5 ounces at $20 per ounce
Direct labor: 1.4 hours at $12.50 per hour
Variable manufacturing overhead: 1.4 hours at 3.50 per hour
Variable manufacturing overhead is applied on the basis of standard direct labor-hours.
The following data are available for October:
3,750 units of compound were produced during the month.
There was no beginning direct materials inventory. .Direct materials purchased: 12,000 ounces for $225,000.
The ending direct materials inventory was 2,000 ounces.
.Direct labor-hours worked: 5,600 hours at a cost of $67,200.
Variable manufacturing overhead costs incurred amounted to $18,200. Variable manufacturing overhead applied to products: $18,375.
The labor efficiency variance for October is: Multiple Choice $1,400 Favorable $1,900 Unfavorable $3,750 Favorable $4,375 Unfavorable
Answer:
Efficiency variance $52,500 Unfavorable
Explanation:
<em>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 . </em>
Hours
3,750 units should have taken (1000×1.4 hours ) = 1,400
but did take <u>5,600 </u>
efficiency variance in (hours) 4,200 unfavorable
Standard rate <u> × $12.50</u>
Efficiency variance <u> $52,500</u> Unfavorable
Efficiency variance $52,500 Unfavorable
