Question

Toby Company has budgeted three hours of direct labor per recliner at a standard cost of $30 per hour. During January, 650 actual hours were worked, completing 200 recliners. All were sold and Toby Company’s actually labor was $31 per hour. What is Toby Company’s direct labor efficiency variance for January?

Answer 1

Answer:

Direct labor efficiency variance=$1,500

Explanation:

Direct labor cost variance is the difference between the actual quantity of direct labor and the standard or budgeted quantity of direct labor multiplied by the standard cost of direct labor..

Step 1: Calculate Actual hours

Actual hours=650 hours

Step 2: Calculate the actual cost

Actual cost=actual hours×actual rate

Actual cost=(650 hrs×$31 per hour)=$20,150

Step 3: Calculate the standard cost

Standard cost=Total number of actual hours×standard rate

where;

Standard rate=$30 per hour

Total number of Actual hours=(200×3)=600 hours

replacing;

Standard cost=(600×30)=$18,000

Step 4: Calculate the direct labor efficiency variance

Efficiency variance=(Actual labor-budgeted labor)×standard price

where;

Actual labor=650 hours

Standard labor=600 hours

standard price=$30 per hour

replacing;

Direct labor efficiency variance=(650-600)×30

Direct labor efficiency variance=(50×30)=$1,500

Direct labor efficiency variance=$1,500