Dreary Credit Agency uses a standard cost system for the processing of its credit applications. The labor standard at Dreary is 10 applications per 8 hour day at a standard cost of $15 per hour. During the last pay period, Dreary's credit agents worked 1,920 hours and processed 2,500 applications. The total labor cost for the agents during this period was $29,184. What was Dreary's labor efficiency variance for this last pay period?
A)$384 Unfavorable
B)$816 Favorable
C)$1,200 Favorable
D)$1,500 Favorable

Question

Quizplus · Accepted Answer

The labor efficiency variance is calculated as (Actual hours - Standard hours) x Standard rate. Standard hours for 2,500 applications is (2,500/10) x 8 = 2,000 hours. The variance is (1,920 - 2,000) x $15 = $1,200 Favorable.

Dreary Credit Agency Uses a Standard Cost System for the Processing