Question

Ramona Company has the following labor-related data.Standard labor hours for output: 15,000 hoursStandard labor rate: $10 per hourActual labor rate: $8 per hourActual labor hours: 17,500 hoursGiven this information, the labor EFFICIENCY variance isA. $10,000 favorableB. $35,000 unfavorableC. $35,000 favorableD. $10,000 unfavorableE. $25,000 unfavorableF. $25,000 favorable

Answer 1

Answer:

E. $25,000 unfavorable

Explanation:

The labor efficiency variance shall be calculated using the following formulas:

Labor efficiency variance=((Standard labor hours used to make the actual production )- (Actual labor hours used to make the actual production))* standard rate per hour

Standard labor hours used to make the actual production=15,000

Actual labor hours used to make the actual production=17,500

standard rate per hour=$10 per hour

Labour efficiency variance=(15,000-17,500)*10

                                           =25,000 unfavourable

So based on the above discussion, the answer shall be E. $25,000 unfavorable