Standard Tires' labor standard for the production of one bicycle tire is 4.5 hours at $8.50 per hour.During October, the company's employees produced 140,000 tires, using 610,000 hours at a total cost of $5,328,400.How much is Standard Tire's labor efficiency variance?
A)$143,400 unfavorable
B)$26,600 favorable
C)$170,000 favorable
D)$313,400 favorable

Question

Quizplus · Accepted Answer

First, let's find the actual hours worked per tire:

Actual hours worked per tire = Total hours worked / Number of tires produced
Actual hours worked per tire = 610,000 / 140,000
Actual hours worked per tire = 4.36 hours

Next, let's calculate the labor efficiency variance:

Labor efficiency variance = (Standard hours - Actual hours) x Standard rate
Labor efficiency variance = (4.5 - 4.36) x $8.50
Labor efficiency variance = 0.14 x $8.50
Labor efficiency variance = $1.19

Finally, let's multiply the labor efficiency variance by the actual number of tires produced to find the total variance:

Total labor efficiency variance = Labor efficiency variance x Number of tires produced
Total labor efficiency variance = $1.19 x 140,000
Total labor efficiency variance = $166,600

Therefore, the answer is C) $170,000 favorable.

Standard Tires' Labor Standard for the Production of One Bicycle