Question

The actual cost of direct labor per hour is 16.00 and the standard cost of direct labor per hour is 15.50. The direct labor hours allowed per finished unit is .5 hour. During the current period, 5500 units of finished goods were produced using 3000 direct labor hours. How much is the direct labor efficiency variance?

Answer 1

Answer: $3,875 Favorable

Explanation: We can compute direct labor efficiency variance by using following formula :-

Direct labor efficiency variance = standard rate ( actual hours - standard hours)

where,

standard hours = 5,500units * 0.5 hour = 2750 hours

actual hours = 3,000 hours

standard rate = $15.5

putting the values into equation we get :-

Direct labor efficiency variance =  $15.5  ( 3,000 - 2750)

                                                    = $3,875 Favorable