Benson Company manufactures special metallic materials for luxury homes that require highly skilled labor.Benson uses standard costs to prepare its flexible budget.For the first quarter of the year,direct materials and direct labor standards for one of their popular products were as follows:
Direct materials: 2 pounds per unit; $4 per pound
Direct labor: 5 hours per unit; $14 per hour
Benson produced 5000 units during the quarter.At the end of the quarter,an examination of the labor costs records showed that the company used 30,000 direct labor hours and actual total direct labor costs were $225,000.What is the direct labor efficiency variance?

Question

Benson Company manufactures special metallic materials for luxury homes that require highly skilled labor.Benson uses standard costs to prepare its flexible budget.For the first quarter of the year,direct materials and direct labor standards for one of their popular products were as follows: 
Direct materials: 2 pounds per unit; $4 per pound
Direct labor: 5 hours per unit; $14 per hour
Benson produced 5000 units during the quarter.At the end of the quarter,an examination of the labor costs records showed that the company used 30,000 direct labor hours and actual total direct labor costs were $225,000.What is the direct labor efficiency variance?

Quizplus · Accepted Answer

The direct labor efficiency variance is calculated as the difference between the standard direct labor cost and the actual direct labor cost. The standard direct labor cost is calculated as the standard direct labor rate multiplied by the standard direct labor hours. The actual direct labor cost is the actual total direct labor costs. In this case, the standard direct labor cost is $14 per hour * 5 hours per unit * 5000 units = $350,000. The actual direct labor cost is $225,000. Therefore, the direct labor efficiency variance is $350,000 - $225,000 = $125,000 U.

Benson Company Manufactures Special Metallic Materials for Luxury Homes That