The following information describes a company's usage of direct labor in a recent period:
$$\begin{array} { | l | l | }
\hline \text { Actual direct labor hours used } & 44,000 \
\hline \text { Actual rate per hour } & \$ 20 \
\hline \text { Standard rate per hour } & \$ 18 \
\hline \text { Standard hours for units produced } & 42,000 \
\hline
\end{array}$$ How much is the direct labor efficiency variance?
A) $40,000 unfavorable
B) $40,000 favorable
C) $36,000 favorable
D) $36,000 unfavorable

Question

The following information describes a company's usage of direct labor in a recent period:
$$\begin{array} { | l | l | } 
\hline \text { Actual direct labor hours used } & 44,000 \
\hline \text { Actual rate per hour } & \$ 20 \
\hline \text { Standard rate per hour } & \$ 18 \
\hline \text { Standard hours for units produced } & 42,000 \
\hline
\end{array}$$ How much is the direct labor efficiency variance?
A) $40,000 unfavorable
B) $40,000 favorable
C) $36,000 favorable
D) $36,000 unfavorable

Quizplus · Accepted Answer

Direct labor efficiency variance is calculated as (Actual hours - Standard hours) x Standard rate = (44,000 - 42,000) x $18 = 2,000 x $18 = $36,000 unfavorable.

The Following Information Describes a Company's Usage of Direct Labor