A company uses the following standard costs to produce a single unit of output. During the latest month, the company purchased and used 58,000 pounds of direct materials at a price of $1.00 per pound to produce 10,000 units of output. Direct labor costs for the month totaled $56,350 based on 4,900 direct labor hours worked. Variable manufacturing overhead costs incurred totaled $15,000 and fixed manufacturing overhead incurred was $10,400. Based on this information, the direct labor efficiency variance for the month was:
A) $3,650 favorable
B) $2,450 favorable
C) $1,200 unfavorable
D) $1,200 favorable
E) $2,450 unfavorable

Question

Quizplus · Accepted Answer

The direct labor efficiency variance is calculated by comparing the actual hours worked to the standard hours allowed for the actual production, multiplied by the standard rate per hour. If the company's standard costs information included a standard rate per hour for direct labor, it would be used here. However, without that specific information, we can infer the calculation involves determining the difference between actual labor hours and standard labor hours, then applying the standard labor rate. Given the information provided does not specify the standard hours or rate, but presents a direct question about the variance, the correct answer is inferred based on the options given. A favorable variance occurs when the actual hours are less than the standard hours allowed for the actual production level. Since we cannot calculate the exact variance without the standard hours or rate, the correct answer is chosen based on the assumption that the variance calculation was done correctly according to the options provided.

A Company Uses the Following Standard Costs to Produce a Single