Information for Bonanza Company's direct labor cost for February is as follows:
$$\begin{array} { | l | r | l | }
\hline \text { Actual direct labor hours } & 69,000 & \
\hline \text { Total direct labor payroll } & \$ 483,000 & \
\hline \text { Efticiency variance } & \$ 6,400 & F \
\hline \text { Rate variance } & \$ 41,400 & \text { U } \
\hline
\end{array}$$ What were the standard direct labor hours for February?
A) 70,000.
B) 69,000.
C) 72,000.
D) 71,400.

Question

Information for Bonanza Company's direct labor cost for February is as follows:
$$\begin{array} { | l | r | l | } 
\hline \text { Actual direct labor hours } & 69,000 & \
\hline \text { Total direct labor payroll } & \$ 483,000 & \
\hline \text { Efticiency variance } & \$ 6,400 & F \
\hline \text { Rate variance } & \$ 41,400 & \text { U } \
\hline
\end{array}$$ What were the standard direct labor hours for February?
A) 70,000.
B) 69,000.
C) 72,000.
D) 71,400.

Quizplus · Accepted Answer

The efficiency variance is calculated as (Standard Hours - Actual Hours) x Standard Rate. Given the efficiency variance is $6,400 F (favorable), it means the standard hours were more than actual hours. Therefore, Standard Hours = Actual Hours + (Efficiency Variance / Standard Rate). Since the variance is favorable, the standard hours must be more than 69,000, leading to 70,000 hours.

Information for Bonanza Company's Direct Labor Cost for February Is