Question

When auto manufacturer BMW purchased the RollsminusRoyce brand​ name, BMW had to hire and train a new staff of assembly workers. The new workers were paid $ 23.00 per​ hour, worked a total of 7 comma 000 ​hours, and produced 1 comma 600 cars. BMW budgeted for a standard labor rate of $ 28.00 per hour and 3.25 direct labor hours per car. What is the direct labor efficiency variance for the RollsminusRoyce ​division? A. $ 50 comma 400 favorable B. $ 50 comma 400 unfavorable C. $ 41 comma 400 unfavorable D. $ 41 comma 400 favorable Click to select your answer.

Answer 1

Answer:

B. $ 50 comma 400 unfavorable

Explanation:

The formula to compute the labor efficiency variance is shown below:

= Standard labor rate ×  (Standard hours for actual output - Actual hours)

where,

Standard labor rate is $28

Standard hours for actual output would be

= 1,600 cars × 3.25 direct labor hours per car

= 5,200 hours

And, the actual hour is 7,000 hours

Now put these values to the above formula  

So, the value would equal to

= $28 × (5,200 hours - 7,000 hours)

= $50,400 unfavorable