Bulluck Corporation makes a product with the following standard costs:
The company reported the following results concerning this product in July.
The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.
-The labor efficiency variance for October is:
A) $1,400 Favorable
B) $1,900 Unfavorable
C) $3,750 Favorable
D) $4,375 Unfavorable

Question

Bulluck Corporation makes a product with the following standard costs:
  The company reported the following results concerning this product in July.
  The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.
-The labor efficiency variance for October is:
A) $1,400 Favorable 
B) $1,900 Unfavorable 
C) $3,750 Favorable 
D) $4,375 Unfavorable

Quizplus · Accepted Answer

SH = 3,750 units × 1.4 hours per unit = 5,250 hours
Labor efficiency variance = (AH − SH) × SR
= (5,600 hours − 5,250 hours) × $12.50 per hour
= (350 hours) × $12.50 per hour
= $4,375 U

Bulluck Corporation Makes a Product with the Following Standard Costs