Preble Company manufactures one product. Its variable manufacturing overhead is

Question

Preble Company manufactures one product. Its variable manufacturing overhead is applied to production based on direct labor-hours and its standard cost card per unit is as follows:

The company also established the following cost formulas for its selling expenses:

What is the direct labor efficiency variance for March?

Preble Company manufactures one product. Its variable manufacturing overhead is applied to production based on direct labor-hours and its standard cost card per unit is as follows:

Explanation / Answer

Standard direct labor hours per unit = 2 hours

So standard direct labor hours required = 2*actual no of units = 2*37,000 = 74,000 hours

Direct labor efficiency variance = (standard direct labor hours required - actual direct labor hours)*standard rate per hour = (74,000-67,000)*$16 = $ 112,000 (favorable)

Hope this helped ! Let me know in case of any queries.

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