Question

The company budgeted for production of 6,400 units in October, but actual production was 6,500 units. The company used 610 direct labor-hours to produce this output. The actual direct labor rate was $21.80 per hour. The labor efficiency variance for October is:

Answer 1

Answer:

Labor efficiency variance = $218 favorable.

Explanation:

We know,

Labor efficiency variance = (Standard Hour - Actual hour) × Standard rate

Given,

Standard labor hour = (Actual labor hour ÷ actual production) × budgeted production

Standard labor hour = (610 hours ÷ 6,500 units) × 6,400 units

Standard labor hour = 600 hours

Actual hour = 610 hours

Standard rate = $21.80 per hour

Therefore, Labor efficiency variance = (610 - 600) hours × $21.80

Labor efficiency variance = $218 favorable.