Milar Corporation makes a product with the following standard costs:
In January the company produced 2,000 units using 16,060 pounds of the direct material and 210 direct labor-hours. During the month, the company purchased 16,900 pounds of the direct material at a cost of $65,910. The actual direct labor cost was $4,473 and the actual variable overhead cost was $756.
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 January is:
A) $200 U
B) $213 U
C) $200 F
D) $213 F

Question

Milar Corporation makes a product with the following standard costs:
  In January the company produced 2,000 units using 16,060 pounds of the direct material and 210 direct labor-hours. During the month, the company purchased 16,900 pounds of the direct material at a cost of $65,910. The actual direct labor cost was $4,473 and the actual variable overhead cost was $756.
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 January is:
A) $200 U 
B) $213 U 
C) $200 F 
D) $213 F

Quizplus · Accepted Answer

SH = 2,000 units × 0.1 hours per unit = 200 hours
Labor efficiency variance = (AH - SH) × SR
= (210 hours − 200 hours) × $20.00 per hour
= (10 hours) × $20.00 per hour
= $200 U

Milar Corporation Makes a Product with the Following Standard Costs