Welch Company budgeted the following cost standards for the current year: Direct materials $= 1.40$ kilograms per unit $@\$ 1.50$ per kilogram
Direct labour $= 0.75$ hours per unit $@ \$ 6$ per hour
Actual production and costs were as follows:
Units produced $= 2,800$
Direct materials used $= 4,500 \mathrm {~kg}$
Direct materials purchased $= 5,000 \mathrm {~kg}@$ a cost of $\$ 5,850$
Direct labour incurred $= 2,000$ hours at a cost of $\$ 13,000$
The labour efficiency variance was:
A) $600 F
B) $400 U
C) $4,800 F
D) $1,000 U

Question

Welch Company budgeted the following cost standards for the current year: Direct materials $= 1.40$ kilograms per unit $@\$ 1.50$ per kilogram
Direct labour $= 0.75$ hours per unit $@ \$ 6$ per hour
Actual production and costs were as follows:
Units produced $= 2,800$
Direct materials used $= 4,500 \mathrm {~kg}$
Direct materials purchased $= 5,000 \mathrm {~kg}@$ a cost of $\$ 5,850$
Direct labour incurred $= 2,000$ hours at a cost of $\$ 13,000$
 The labour efficiency variance was:
A) $600 F
B) $400 U
C) $4,800 F
D) $1,000 U

Quizplus · Accepted Answer

The labor efficiency variance is calculated as (Actual hours - Standard hours) x Standard rate. Standard hours for 2,800 units = 2,800 x 0.75 = 2,100 hours. Actual hours = 2,000. Variance = (2,000 - 2,100) x $6 = $600 F.

Welch Company Budgeted the Following Cost Standards for the Current =1.40= 1.40=1.40

Welch Company Budgeted the Following Cost Standards for the Current $= 1.40$