Gilder Corporation makes a product with the following standard costs:

The company reported the following results concerning this product in June.

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)$640 F
B)$640 U
C)$612 F
D)$612 U

Question

Gilder Corporation makes a product with the following standard costs:

The company reported the following results concerning this product in June.

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)$640 F 
B)$640 U 
C)$612 F 
D)$612 U

Quizplus · Accepted Answer

The labor efficiency variance is calculated as (Actual Hours - Standard Hours) x Standard Rate. If the actual hours are less than the standard hours, the variance is favorable (F). The given variance of $640 F indicates that the actual hours were less than the standard hours, resulting in a favorable variance.

Gilder Corporation Makes a Product with the Following Standard Costs