Chhom Corporation makes a product whose direct labor standards are 0.8 hours per unit and $25 per hour. In November the company produced 7,200 units using 5,260 direct labor-hours. The actual direct labor cost was $110,460.The labor efficiency variance for November is:
A) $33,540 Favorable
B) $12,500 Favorable
C) $12,500 Unfavorable
D) $33,540 Unfavorable

Question

Quizplus · Accepted Answer

The labor efficiency variance is calculated as (Actual Hours - Standard Hours) x Standard Rate. Standard Hours = 7,200 units x 0.8 hours/unit = 5,760 hours. Variance = (5,260 - 5,760) x $25 = -500 x $25 = $12,500 Favorable.

Chhom Corporation Makes a Product Whose Direct Labor Standards Are