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?

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. In this case, the actual direct labor hours used were 9,820, the standard direct labor hours allowed for the actual output were 8,500 * 1.25 = 10,625, and the standard direct labor rate was $11.00 per hour. Therefore, the labor efficiency variance is (9,820 - 10,625) * $11.00 = $8,855 favorable.

Holiday Chemical Corporation Uses a Standard Cost System to Collect