Abba Company produces sails for boats. The Houston plant uses a standard costing

Question

Abba Company produces sails for boats. The Houston plant uses a standard costing system with the following standards for materials (cloth) and direct labor.

There are no beginning or ending inventories for direct materials.

For direct labor, what is the efficiency variance?

Standards     Cloth (Direct Materials)         Standard Price $ 5     Direct Labor         Standard Rate $ 9 December Data     Number of Sails Produced 20,419     Cloth (Direct Materials)         Actual Price $ 4         Actual Usage 114,512 square yards         Standard Quantity Allowed (given production) 115,138 square yards     Direct Labor         Actual Rate $ 10         Actual Usage 23,666 hours         Standard Quantity Allowed (given production) 22,250 hours

Explanation / Answer

Direct Labor Efficiency Variance = (Standard Hours- Actual Hours) x Standard Rate                                                              = [22250 - 23666] x 10                                                              = 14160 Unfav

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