Colonial Pewter makes pewter bookends. 2,000 bookends were made. Use the data be
ID: 2490725 • Letter: C
Question
Colonial Pewter makes pewter bookends. 2,000 bookends were made. Use the data below to calculate a direct labor efficiency variance.
Include whether the variance is favorable or unfavorable.
Standards used:
Direct Materials: 3 pounds x $3.50 per pound = $10.50 per unit.
Direct Labor: 2 hours x $10 per hour = $20 per unit Var. Manuf. Ovhrd: 2 hurs per unit x $3 per hour = $6 per unit
Actual Costs: Direct Materials: 8,000 pounds of pewter purchased for $3 per pound for $24,000 Direct Labor: 5,000 hurs at $11 per hour was paid for $55,000 Var. Manuf. Ovhrd: $8,000 (assume 2,000 labor hours at $4 per hour)
Explanation / Answer
Direct labour efficiency variance = ( standard hours - actual hours) * standard rate
= [ ( 2 hours *2000) - 5000] * 10
Direct labour efficiency variance = 10000 Unfavourable