Hassock Corp.produces woven wall hangings.It takes 2 hours of direct labor to produce a single wall hanging.Hassock's standard labor cost is $12 per hour.During August,Hassock produced 10,000 units and used 21,040 hours of direct labor at a total cost of $250,376.What is Hassock's labor efficiency variance for August?

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Quizplus · Accepted Answer

The labor efficiency variance is calculated as (Actual Hours - Standard Hours) x Standard Rate. Standard hours for 10,000 units = 10,000 units x 2 hours/unit = 20,000 hours. Actual hours = 21,040 hours. Difference = 21,040 - 20,000 = 1,040 hours. Variance = 1,040 hours x $12/hour = $12,480 unfavorable, because actual hours exceeded standard hours.