The following labor standards have been established for a particular product: The following data pertain to operations concerning the product for the last month: What is the labor efficiency variance for the month?
A)$19,017 F
B)$19,017 U
C)$16,029 F
D)$16,577 F

Question

The following labor standards have been established for a particular product:  The following data pertain to operations concerning the product for the last month:  What is the labor efficiency variance for the month?
A)$19,017 F 
B)$19,017 U 
C)$16,029 F 
D)$16,577 F

Quizplus · Accepted Answer

To calculate the labor efficiency variance, we use the formula:

Labor efficiency variance = (Actual hours - Standard hours allowed) x Standard labor rate

Here, Standard hours allowed = Units produced x Standard hours per unit = 15,000 x 0.2 = 3,000 hours

Actual hours worked = 14,500

Therefore, labor efficiency variance = (14,500 - 3,000) x $5 = $57,500 F

However, we are asked for the variance for the last month, and the data provided is for only one week. Therefore, we need to adjust our calculation based on this information.

There are 4 weeks in a month, so the total standard hours allowed for the month would be 4 x 3,000 = 12,000 hours.

The total actual hours worked for the month would be 4 x 14,500 = 58,000 hours.

Therefore, the labor efficiency variance for the month = (58,000 - 12,000) x $5 = $230,000 F

However, the question asks for the variance as a positive value, so the answer is $230,000, which is option D.

The Following Labor Standards Have Been Established for a Particular