Quick Tax Returns budgets 1.5 direct labor hours for every tax return that it prepares, at a standard
Cost of $20 an hour. During the most recent year, 500 returns were completed with the labor cost
Totaling $17,600. The actual labor cost was $22 per hour during that period. What was the direct labor efficiency variance?
A) $1,000 unfavorable
B) $1,000 favorable
C) $1,100 favorable
D) $1,100 unfavorable

Question

Quizplus · Accepted Answer

The direct labor efficiency variance is calculated as (Actual Hours - Standard Hours) x Standard Rate. Standard Hours = 500 returns x 1.5 hours = 750 hours. Actual Hours = $17,600 / $22 per hour = 800 hours. Efficiency Variance = (800 - 750) x $20 = $1,000 unfavorable.

Quick Tax Returns Budgets 1