A company uses the following standard costs to produce a single unit of output. $$\begin{array} { l l l l }
\text { Direct materals } & 6 \text { pourds at } \$ 0.90 \text { per pound } & = & \$ 5.40 \
\text { Direct labor } & 0.5 \text { hour at } \$ 12.00 \text { per hour } & = & \$ 6.00 \
\text { Marufacturing overhead } & 0.5 \text { hour at } \$ 4.80 \text { per hour } & = \$ 2.40
\end{array}$$ During the latest month,the company purchased and used 58,000 pounds of direct materials at a price of $1.00 per pound to produce 10,000 units of output.Direct labor costs for the month totaled $56,350 based on 4,900 direct labor hours worked.Variable manufacturing overhead costs incurred totaled $15,000 and fixed manufacturing overhead incurred was $10,400.Based on this information,the direct labor efficiency variance for the month was:
A)$3,650 favorable
B)$2,450 favorable
C)$1,200 unfavorable
D)$1,200 favorable
E)$2,450 unfavorable

Question

A company uses the following standard costs to produce a single unit of output. $$\begin{array} { l l l l } 
\text { Direct materals } & 6 \text { pourds at } \$ 0.90 \text { per pound } & = & \$ 5.40 \
\text { Direct labor } & 0.5 \text { hour at } \$ 12.00 \text { per hour } & = & \$ 6.00 \
\text { Marufacturing overhead } & 0.5 \text { hour at } \$ 4.80 \text { per hour } & = \$ 2.40
\end{array}$$ During the latest month,the company purchased and used 58,000 pounds of direct materials at a price of $1.00 per pound to produce 10,000 units of output.Direct labor costs for the month totaled $56,350 based on 4,900 direct labor hours worked.Variable manufacturing overhead costs incurred totaled $15,000 and fixed manufacturing overhead incurred was $10,400.Based on this information,the direct labor efficiency variance for the month was:
A)$3,650 favorable
B)$2,450 favorable
C)$1,200 unfavorable
D)$1,200 favorable
E)$2,450 unfavorable

Quizplus · Accepted Answer

The direct labor efficiency variance is calculated as the difference between the actual direct labor hours used and the standard direct labor hours allowed, multiplied by the standard direct labor rate. In this case, the actual direct labor hours used were 4,900, the standard direct labor hours allowed were 5,000 (10,000 units * 0.5 hour per unit), and the standard direct labor rate was $12.00 per hour. Therefore, the direct labor efficiency variance is (4,900 - 5,000) * $12.00 = $1,200 favorable.

A Company Uses the Following Standard Costs to Produce a Single