Tharaldson Corporation makes a product with the following standard costs: Standa

Question

Tharaldson Corporation makes a product with the following standard costs: Standard Quantity or Hours 7.6 ounces 0.5 hours 0.5 hours Standard Standard Price or Cost Per Rate $4.00 per ounce $ 10.00 per hour $ 9.00 per houn Unit Direct materials Direct labor Variable overhead $30.40 $ 5.00 $ 4.50 The company reported the following results concerning this product in June Originally budgeted output Actual output Raw materials used in production Purchases of raw materials Actual direct labor-hours Actual cost of raw materials purchases Actual direct labor cost Actual variable overhead cost 3,000 units 3,100 units 16,300 ounces 17,400 ounces 510 hours 45,000 $ 13,000 $3,500 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:

Explanation / Answer

Labour efficiency variance = (standard hours - actual hours) * standard rate

here,

standard hours = 0.5 hours per unit * 3,100 units =>1,550 hours.

actual hours = 510 hours.

standard rate = $10 per hout

labour efficiency variance = (1,550 - 510)* ($10)

=>$10,400.......(favourable)

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