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16 September, 18:40

Lion Company's direct labor costs for the month of January were as follows: Actual total direct labor-hours 20,000 Standard total direct labor-hours 21,000 Direct labor rate variance-unfavorable $3,000 Total direct labor cost $126,000 What was Lion's direct labor efficiency variance?

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  1. 16 September, 19:01
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    6,150 Favorable

    Explanation:

    Direct labor Efficiency variance:

    Direct labor rate variance = (SR - AR) AH

    Where,

    AH = Actual labor hours

    SR = Standard rate

    AR = Actual rate

    = Total direct labor cost : Actual total direct labor-hours

    = $126,000 : 20,000

    = 6.3

    SH = Standard labor hours

    - 3,000 = 20,000 (SR - 6.3)

    - 3,000 = 20,000 * SR - 126,000

    SR = $6.15

    Labor Efficiency variance = (SH - AH) * SR

    = (21,000 - 20,000) * 6.15

    = 6,150 Favorable
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