Hofbauer Inc. has provided the following data concerning one of the products in

Question

Hofbauer Inc. has provided the following data concerning one of the products in its standard cost system. Inputs Standard Quantity or Hours per Unit of Output Standard Price or Rate Direct labor 0.30 hours $21.00 per hour The company has reported the following actual results for the product for September: Actual output 5,600 units Actual direct labor-hours 1,540 hours Actual direct labor rate $ 21.40 per hour Actual direct labor cost $ 32,956 The labor efficiency variance for the month is closest to: Multiple Choice

$2,996 U

$2,996 F

$2,940 F

$2,940 U

Explanation / Answer

Answer is 2940 F Labor Efficiency variance AH (a) SH (b) Variance (c=b-a) AR (d) Total variance (e=c*d) F/U Labor Efficiency variance = (AH-SH)*AR AH = Actual hours = 1540 SH = Standard Hours = 5600*0.3 = 1680 SR = Standard Rate per hour = $21 F= Favourable U = Unfavourable Labor Efficiency variance AH (a) SH (b) Variance (c=b-a) SR (d) Total variance (e=c*d) F/U 1540 1680 140 21 2940 F

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