Galla Corporation makes a product with the following standard costs:

The company budgeted for production of 2,400 units in June, but actual production was 2,500 units. The company used 19,850 pounds of direct material and 980 direct labor-hours to produce this output. The company purchased 21,700 pounds of the direct material at $6.70 per pound. The actual direct labor rate was $19.20 per hour and the actual variable overhead rate was $1.80 per hour.

The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.

-The labor efficiency variance for June is:
A)$384 F
B)$400 U
C)$400 F
D)$384 U

Question

Galla Corporation makes a product with the following standard costs:

The company budgeted for production of 2,400 units in June, but actual production was 2,500 units. The company used 19,850 pounds of direct material and 980 direct labor-hours to produce this output. The company purchased 21,700 pounds of the direct material at $6.70 per pound. The actual direct labor rate was $19.20 per hour and the actual variable overhead rate was $1.80 per hour.

The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.

-The labor efficiency variance for June is:
A)$384 F 
B)$400 U 
C)$400 F 
D)$384 U

Quizplus · Accepted Answer

The labor efficiency variance is calculated as the difference between the actual labor hours and the standard labor hours, multiplied by the standard labor rate. In this case, the actual labor hours are 1,000 hours, the standard labor hours are 960 hours, and the standard labor rate is $40 per hour. Therefore, the labor efficiency variance is (1,000 - 960) * $40 = $400 F.

Galla Corporation Makes a Product with the Following Standard Costs