Pippin Inc. has provided the following data concerning one of the products in its standard cost system. Variable manufacturing overhead is applied to products on the basis of direct labor-hours.
The company has reported the following actual results for the product for June:

-The labor efficiency variance for the month is closest to:
A) $5,425 U
B) $5,425 F
C) $5,325 U
D) $5,325 F

Question

Pippin Inc. has provided the following data concerning one of the products in its standard cost system. Variable manufacturing overhead is applied to products on the basis of direct labor-hours.
  The company has reported the following actual results for the product for June:
 
-The labor efficiency variance for the month is closest to:
A) $5,425 U 
B) $5,425 F 
C) $5,325 U 
D) $5,325 F

Quizplus · Accepted Answer

SH = 8,500 units × 0.30 hours per unit = 2,550 hours
Labor efficiency variance = (AH × SR) - (SH × SR)
= (AH - SH) × SR
= (2,300 hours - 2,550 hours) × $21.30 per hour
= (-250 hours) × $21.30 per hour
= $5,325 F