The company that you are auditing has the following standards: Standard direct l
ID: 2596451 • Letter: T
Question
The company that you are auditing has the following standards:
Standard direct labor-hours
0.2
hours per unit
Standard direct labor rate
$18.00
per hour
Standard cost
$1.85
per unit
They budgeted for production of 3500 units but actual production was 3800 units. The company used 715 direct labor hours to produce the units. The actual labor rate was $16.85 per hour. What is the labor efficiency variance? (F or U)
Standard direct labor-hours
0.2
hours per unit
Standard direct labor rate
$18.00
per hour
Standard cost
$1.85
per unit
Explanation / Answer
Labor efficiency Variance = (Standard abor hour-actual Labor hour)*Standard Labor rate = (760-715)*18 = $ 810 F Working: Standard Labour hour = Actual Production * Standard Labor hour per unit = 3,800 x 0.20 = 760