Alexis Company recently completed 11,600 units of its single product, consuming

Question

Alexis Company recently completed 11,600 units of its single product, consuming 47,000 labor hours that cost the firm $742,600. According to manufacturing specifications, each unit should have required 4 hours of labor time at $16.20 per hour.

On the basis of this information, determine Alexis's labor rate variance and labor efficiency variance.

Choice A

Choice B

Choice C

Choice D

Choice E

Rate Efficiency   A. $ 18,560 F     $ 9,480 F       B. $ 18,560 F     $ 9,480 U       C. $ 18,800 F     $ 9,720 F       D. $ 18,800 F     $ 9,720 U       E. $ 18,800 U     $ 9,720 U    

Explanation / Answer

The correct answer is :

Choice D

Note :

The  labor rate variance = ( Actual Hours * Actual Rate) - ( Actual Hours * STandard Rate)

= $  742,600 - ( 47,000*$ 16.20)

= $ 742,600 - $ 761,400

= $ 18,800 Favorable

Since the Actuals is less than the standard the Variance is Favorable.

labor efficiency variance. = (Actual Hours * STandard Rate) - ( Standard Hours *  STandard Rate)

= [ 47,000 *$ 16.20] - ( 11,600 * 4 * $16.20)

= 761,400 - $751,680

= $ 9,720 U

Since the Actuals is more than the standard the Variance is UnFavorable.

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