Assume that the standard cost to make one finished unit includes two hours of direct labor at $8 per hour. During April, 22,000 direct labor hours were worked, 10,500 units of product were manufactured, and total direct labor cost was $170,000. What is the (approximate) labor efficiency variance for April?

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Quizplus · Accepted Answer

The labor efficiency variance is calculated as (Actual Hours - Standard Hours) * Standard Rate. Standard hours for 10,500 units = 10,500 units * 2 hours/unit = 21,000 hours. Actual hours = 22,000. Variance = (22,000 - 21,000) * $8 = 1,000 * $8 = $8,000 unfavorable.

Assume That the Standard Cost to Make One Finished Unit