Holiday Chemical Corporation uses a standard cost system to collect costs related to the production of its "bowling ball" fruitcakes. The direct labor standard for each fruitcake is 1.25 hours at a standard cost of $11.00 per hour. During the month of November, Holiday's fruitcake production used 9,820 direct labor-hours at a total direct labor cost of $106,547. This resulted in production of 8,500 fruitcakes for November. What is Holiday's labor efficiency variance for November?
A)$8,855 Favorable
B)$10,328 Favorable
C)$13,047 Unfavorable
D)$14,520 Unfavorable

Question

Quizplus · Accepted Answer

The labor efficiency variance is calculated as the difference between the actual direct labor hours used and the standard direct labor hours allowed for the actual output, multiplied by the standard direct labor rate.Actual direct labor hours used = 9,820 hoursStandard direct labor hours allowed = 8,500 fruitcakes * 1.25 hours per fruitcake = 10,625 hoursStandard direct labor rate = $11.00 per hourLabor efficiency variance = (Actual direct labor hours used - Standard direct labor hours allowed) * Standard direct labor rate= (9,820 hours - 10,625 hours) * $11.00 per hour= -805 hours * $11.00 per hour= -$8,855The labor efficiency variance is unfavorable because the actual direct labor hours used exceeded the standard direct labor hours allowed.

Holiday Chemical Corporation Uses a Standard Cost System to Collect