Chhom Corporation makes a product whose direct labor standards are 0.4 hours per unit and $19.00 per hour. In November the company produced 1,800 units using 760 direct labor-hours. The actual direct labor cost was $13,300.The labor efficiency variance for November is:
A) $700 Favorable
B) $760 Favorable
C) $760 Unfavorable
D) $700 Unfavorable

Question

Quizplus · Accepted Answer

To calculate the labor efficiency variance, we need to determine the difference between the actual direct labor hours used and the standard direct labor hours allowed, and then multiply that by the standard hourly rate.

Standard direct labor hours for the 1,800 units produced = 1,800 x 0.4 = 720 hours

Labor efficiency variance = (Actual direct labor hours - Standard direct labor hours) x Standard hourly rate
= (760 - 720) x $19
= $760 Unfavorable

Chhom Corporation Makes a Product Whose Direct Labor Standards Are