Question

Ravena Labs., Inc. makes a single product which has the following standards:

Direct materials....................................2.5 ounces at $20 per ounce
Direct labor...........................................1.4 hours at $12.50 per hour
Variable manufacturing overhead.........1.4 hours at ? per hour

Variable manufacturing overhead is applied on the basis of direct labor hours. The following data are available for October:

• 3,750 units of compound were produced during the month.
• There was no beginning direct materials inventory.
• Direct materials purchased: 12,000 ounces for $225,000.
• The ending direct materials inventory was 2,000 ounces.
• Direct labor-hours worked: 5,600 hours at a cost of $67,200.
• Variable manufacturing overhead costs incurred amounted to $18,200.
• Variable manufacturing overhead applied to products: $18,375.

The labor efficiency variance for October is:

a) $1,400 Favorable
b) $1,900 Unfavorable
c) $3,750 Favorable
d) $4,375 Unfavorable

Answer 1

Answer:

Direct labor time (efficiency) variance= $4,375 unfavorable

Explanation:

Giving the following information:

Standard

Direct labor...........................................1.4 hours at $12.50 per hour

Direct labor-hours worked: 5,600 hours for $67,200.

units produced= 3,750

To calculate the direct labor efficiency variance, we need to use the following formula:

Direct labor time (efficiency) variance= (Standard Quantity - Actual Quantity)*standard rate

standard quantity= 1.4*3,750= 5,250

Direct labor time (efficiency) variance= (5,250 - 5,600)*12.5

Direct labor time (efficiency) variance= $4,375 unfavorable