Figure 17-4
Shannon Ltd.'s standard cost card contained the following information:
Direct labour: 1.25 hours * £8.00 per hour = £10.00
Shannon planned to make 12,000 units. Shannon actually made 10,000 units using 13,000 hours.
-Refer to Figure 17-4. Shannon's labour efficiency variance was
A)£4,625 unfavourable.
B)£4,000 unfavourable.
C)£27,750 unfavourable.
D)£24,000 unfavourable.

Question

Quizplus · Accepted Answer

The labour efficiency variance is calculated as (Actual Hours - Standard Hours) x Standard Rate. The standard hours for the actual production (10,000 units) would be 1.25 hours/unit * 10,000 units = 12,500 hours. The actual hours used were 13,000 hours. Therefore, the variance is (13,000 hours - 12,500 hours) * £8.00/hour = 500 hours * £8.00/hour = £4,000 unfavourable.

Figure 17-4 Shannon Ltd.'s Standard Cost Card Contained the Following Information