Hassock Corp. produces woven wall hangings. It takes 2 hours of direct labor to produce a single wall hanging. Hassock's standard labor cost is $12 per hour. During August, Hassock produced 10,000 units and used 21,040 hours of direct labor at a total cost of $250,376. What is Hassock's labor efficiency variance for August?

Question

Quizplus · Accepted Answer

The labor efficiency variance is calculated as (Actual Hours - Standard Hours) x Standard Rate. Standard Hours for 10,000 units is 20,000 hours (10,000 units x 2 hours/unit). The variance is (21,040 - 20,000) x $12 = $12,480 unfavorable.