Extreme Builders constructs houses. The standard labor rate is $25 per hour and the standard number of hours is 15,000 hours per home. During the year, it constructed 12 homes using 18,000 labor hours per home and a rate of $28 per hour.
-Refer to Figure 10-6. Calculate the labor efficiency variance.
A) $1,008,000 F
B) $900,000 U
C) $1,008,000 U
D) $900,000 F

Question

Quizplus · Accepted Answer

The labor efficiency variance is calculated as (Actual hours - Standard hours) x Standard rate. Here, (18,000 hours/home - 15,000 hours/home) x 12 homes x $25/hour = $900,000 Unfavorable.

Extreme Builders Constructs Houses