A company uses the following standard costs to produce a single unit of output.

Question

A company uses the following standard costs to produce a single unit of output. Direct materials Direct labor Manufacturing overhead 8 pounds at $1.10 per pound$8.80 0.4 hour at $8.00 per hour 0.4 hour at $4.30 per hour $3.20 = $1.12 During the latest month, the company purchased and used 77,000 pounds of direct materials at a price of $1.30 per pound to produce 10,000 units of output. Direct labor costs for the month totaled $29,412 based on 3,870 direct labor hours worked Variable manufacturing overhead costs incurred totaled $14,200 and fixed manufacturing overhead incurred was $17,000. Based on this information, the direct labor efficiency variance for the month was:

Explanation / Answer

Standard Hours (SH)

10000*0.4

4000

Standard Rate (SR)

8

Actual Hours (AH)

3870

Direct Labour Efficiency Variance

SR*(SH - AH)

8*(4000 - 3870)

8*(130)

1040 Favourable

Standard Hours (SH)

10000*0.4

4000

Standard Rate (SR)

8

Actual Hours (AH)

3870

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