Question

The following labor standards have been established for a particular product: Standard labor-hours per unit of output 10 hours Standard labor rate $ 13.80 per hour The following data pertain to operations concerning the product for the last month: Actual hours worked 7,800 hours Actual total labor cost $ 104,520 Actual output 1,050 units What is the labor efficiency variance for the month?

Answer 1

Actual Hours = 3,800 Hours

Standard Hours = 500 × 8.7

= 4,350 Hours

Standard Rate = $18.10

Labor Efficiency Variance = (Actual hours – Standard hours) × Standard rate

= (3,800 – 4,350) × $18.10

= $9,955 Favorable