Dreary Credit Agency uses a standard cost system for the processing of its credi

Question

Dreary Credit Agency uses a standard cost system for the processing of its credit applications. The. labor standard at Dreary is 10 applications per 8 hour day at a standard cost of $15 per hour. During the last pay period. Dreary's credit agents worked 1.920 hours and processed 2,500 applications. The total labor cost for the agents during this period was $29,184. What was Drear}-: labor efficiency variance for this last pay period? A. $384 Unfavorable B. $816 Favorable . $1, 200 Favorable D. $1,500 Favorable

Explanation / Answer

Answer: C: $1200 favourable

Standard hours allowed for actual work accomplished = (2500 pages / 10 pages) x 8 hours = 2000 hours

labour efficiency variance

= (actual hours worked - standard hours allowed for actual work) x Standard labour Rate

= (1920 - 2000) hours x $15 per hour

= $1200 Favourable

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