Ethene Builders constructs houses.The standard labor rate is $20 per hour and the standard number of hours is 13,000 hours per home.During the year, it constructed 12 homes using 15,000 labor hours per home and a rate of $23 per hour. Calculate the labor efficiency variance.
A) $540,000 F
B) $480,000 U
C) $540,000 U
D) $480,000 F

Question

Quizplus · Accepted Answer

Labor Efficiency Variance = (Actual Hours* - Standard Hours**) × Standard Rate = (180,000 - 156,000) × $20 = $480,000 U
Actual Hours* = Units produced × Actual labor hours = 15,000 ×12 = 180,000 hours
Standard Hours** = Units produced × Standard labor hours = 13,000 × 12 = 156,000 hours

Ethene Builders Constructs Houses