Cole Laboratories makes and sells a lawn fertilizer called Fastgro. The company has developed standard costs for one bag of Fastgro as follows:

The company had no beginning inventories of any kind on January 1. Variable manufacturing overhead is applied to production on the basis of direct labour hours. The results of the company's operations during January are as follows:

-What was the labour efficiency variance for January?
A) $110 favourable.
B) $130 unfavourable.
C) $350 unfavourable.
D) $475 favourable.

Question

Cole Laboratories makes and sells a lawn fertilizer called Fastgro. The company has developed standard costs for one bag of Fastgro as follows:

The company had no beginning inventories of any kind on January 1. Variable manufacturing overhead is applied to production on the basis of direct labour hours. The results of the company's operations during January are as follows:

-What was the labour efficiency variance for January?
A) $110 favourable. 
B) $130 unfavourable. 
C) $350 unfavourable. 
D) $475 favourable.

Quizplus · Accepted Answer

The labour efficiency variance is calculated by comparing the actual hours worked to the standard hours allowed for the actual production, multiplied by the standard labour rate. The correct calculation results in a $110 favourable variance.

Cole Laboratories Makes and Sells a Lawn Fertilizer Called Fastgro