Tharaldson Corporation makes a product with the following standard costs: The co

Question

Tharaldson Corporation makes a product with the following standard costs:

The company reported the following results concerning this product in June.

The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.

The labor efficiency variance for June is:

A. 1,870 F

B. 2,750 U

C. 2,750 F

D. 1,870 U

Standard Quantity or Hours Standard Price or Rate Standard Cost Per Unit Direct materials 5.7 ounces $ 2.00 per ounce $ 11.40 Direct labor 0.2 hours $ 11.00 per hour $ 2.20 Variable overhead 0.2 hours $ 6.00 per hour $ 1.20

Explanation / Answer

A. 1,870 F

SH = 3,500 units × 0.2 hours per unit = 700 hours

Labor efficiency variance = (AH – SH) × SR

= (530 hours ? 700 hours) × $11 per hour

= (?170 hours) × $11 per hour

= $1,870 F

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