Lion Company's direct labor costs for the month of January were as follows: What was Lion's direct labor efficiency variance? Select one: a. $6,000 favorable b. $6,150 favorable c. $6,300 favorable d. $6,450 favorable

Direct labor time (efficiency) variance = $6,150 favorable

Explanation:

Giving the following information:

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

First, we need to calculate the standard direct labor hour cost.

Direct labor rate variance = (Standard Rate - Actual Rate) * Actual Quantity

Actual rate = 126,000/20,000 = 6.3

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

-3,000 = SR20,000 - 126,000

123,000/20,000 = SR

6.15 = Standard rate

To calculate the direct labor efficiency variance, we need to use the following formula:

Direct labor time (efficiency) variance = (Standard Quantity - Actual Quantity) * standard rate

Direct labor time (efficiency) variance = (21,000 - 20,000) * 6.15

Direct labor time (efficiency) variance = $6,150 favorable