Choco Sweet Inc.gives you the following information: The standard labor time of 0.75 labor hour is required to produce one unit.The standard labor cost for a 10 pound bag of chocolate is $8 per labor hour.The following is data relating to the actual cost and usage data.

-Using the above information provided for Choco Sweet,compute the direct labor efficiency variance for Choco Sweet.
A)$8,500 (
B)$2,500 (
C)$11,000 (
D)$1,375 (

Question

Choco Sweet Inc.gives you the following information: The standard labor time of 0.75 labor hour is required to produce one unit.The standard labor cost for a 10 pound bag of chocolate is $8 per labor hour.The following is data relating to the actual cost and usage data.
 
-Using the above information provided for Choco Sweet,compute the direct labor efficiency variance for Choco Sweet.
A)$8,500 (
B)$2,500 (
C)$11,000 (
D)$1,375 (

Quizplus · Accepted Answer

Direct labor efficiency variance measures the difference between the actual labor hours used and the standard labor hours allowed for the production of actual output.
 
Given data: 
Standard labor time= 0.75 labor hour/unit
Standard labor cost= $8 per labor hour/unit

Actual data:
Actual output= 7500 units
Actual labor hours= 5400 labor hours
Actual labor cost= $49,680 ($8 X 5400)

Calculation:
Standard labor hours allowed= 0.75 labor hour/unit x 7500 units= 5625 labor hours
Direct labor efficiency variance= Standard labor hours allowed - Actual labor hours
Direct labor efficiency variance= 5625 labor hours - 5400 labor hours= 225 labor hours

As the actual labor hours are less than the standard labor hours, the variance is unfavorable or adverse. 
Direct labor efficiency variance= 225 labor hours x $8 per labor hour= $1,800
Hence, the correct answer is C) $11,000 (F).