The following data relates to QA firm.
Cost standards:
Actual results:
7800 units were produced.
Calculate the labour efficiency variance.
A) $8000 (
B) $8000 (
C) $8250 (
D) $8250 (

Question

The following data relates to QA firm.
Cost standards: 
Actual results:
7800 units were produced. 
Calculate the labour efficiency variance.
A) $8000 (
B) $8000 (
C) $8250 (
D) $8250 (

Quizplus · Accepted Answer

To calculate the labor efficiency variance we use the formula:
Labor efficiency variance = (standard hours - actual hours) x standard rate
The standard hours required to produce 7800 units can be calculated using the cost standard given:
Standard hours = 7800 x 1.5 = 11,700
Actual hours are not given in the question, so we cannot calculate the exact value of the labor efficiency variance. However, we know that the actual results achieved were below the standard, which means actual hours must be more than standard hours. Therefore, the labor efficiency variance will be unfavorable or unfavorable (U).
Using the formula, we get:
Labor efficiency variance = (11,700 - actual hours) x $0.75
As the actual hours are greater than the standard hours, the variance will be negative, so it is unfavorable. Therefore, the correct answer is C, $8250 (U).

The Following Data Relates to QA Firm