Information for Bonanza Company's direct labor cost for February is as follows:
$$\begin{array} { l r r }
\text { Actual direct labor hours } & & 69,000 \
\text { Total direct labor payroll } & \$ & 483,000 \
\text { Efficiency variarce } & \$ & 6,400 \mathrm {~F} \
\text { Rate variance } & \$ & 41,400 \mathrm { U }
\end{array}$$
What were the standard direct labor hours for February?
A) 70,000.
B) 69,000.
C) 72,000.
D) 71,400.

Question

Information for Bonanza Company's direct labor cost for February is as follows:
$$\begin{array} { l r r } 
\text { Actual direct labor hours } & & 69,000 \
\text { Total direct labor payroll } & \$ & 483,000 \
\text { Efficiency variarce } & \$ & 6,400 \mathrm {~F} \
\text { Rate variance } & \$ & 41,400 \mathrm { U }
\end{array}$$
What were the standard direct labor hours for February?
A) 70,000.
B) 69,000.
C) 72,000.
D) 71,400.

Quizplus · Accepted Answer

The efficiency variance is calculated as (Standard Hours - Actual Hours) x Standard Rate. Given the efficiency variance is $6,400 F (favorable), it means the actual hours were less than the standard hours. Since the variance is favorable, the standard hours must be higher than the actual hours of 69,000. Solving for standard hours gives 70,000.

Information for Bonanza Company's Direct Labor Cost for February Is