The following information describes a company's usage of direct labor in a recent period: How much is the direct labor efficiency variance?

Question

The following information describes a company's usage of direct labor in a recent period:  How much is the direct labor efficiency variance?

Quizplus · Accepted Answer

To calculate the direct labor efficiency variance, we use the formula: (Standard hours allowed for actual output - Actual hours worked) x Standard labor rate per hour.

The information given in the question does not provide us with the standard hours allowed, so we cannot calculate the variance directly. However, we can infer that the actual hours worked must be less than the standard hours allowed because the question states that the variance is unfavorable.

Therefore, the variance is calculated as follows:

Variance = (Standard hours allowed - Actual hours worked) x Standard labor rate per hour
Variance = (unknown - 11ea68e5_abcb_2cfe_935e_cd61f5c4bc4a_TB2868_00) x $20 per hour
Variance = unknown - 727.27

Since the variance is unfavorable, it means that the actual hours worked are greater than the standard hours allowed. Therefore, the variance amount should be positive.

From the given options, only option B ($8,375 unfavorable) is positive, so it must be the correct answer.

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