Davner Enterprises recently used 14,000 labor hours to produce 7,500 completed units. According to manufacturing specifications, each unit is anticipated to take two hours to complete. The company's actual payroll cost amounted to $158,200. If the standard labor cost per hour is $11, Davner's labor efficiency variance is:
A) $11,000U.
B) $11,000F.
C) $11,300U.
D) $11,300F.
E) None of the answers is correct.

Question

Quizplus · Accepted Answer

The labor efficiency variance is calculated as (Actual labor hours - Standard labor hours) x Standard labor rate. In this case, the actual labor hours are 14,000, the standard labor hours are 7,500 x 2 = 15,000, and the standard labor rate is $11. Therefore, the labor efficiency variance is (14,000 - 15,000) x $11 = $11,000F.

Davner Enterprises Recently Used 14,000 Labor Hours to Produce 7,500