Budgat Co. began operations on June 2, 20x5. The owner, Charlie, designs, makes,

Question

Budgat Co. began operations on June 2, 20x5. The owner, Charlie, designs, makes, and sells clothing. Charlie knows the importance of cost management and so creates budgets for each period and keeps very detailed records. The standard direct labour cost per unit for 20x5 is 4.1 hours per unit at $19.85 per hour. During the year, 3303 units were made, which was 39 more than was expected. At the end of the year, records indicate that a total of 10756 DLH were used at $26.31 per hour. What is the direct labour efficiency variance?

Explanation / Answer

Labour efficiency variance = (Standard hour-actual hour)Standard rate

                                       = 39*19.85

Labour efficiency variance = -774.15 Unfavourable

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