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 Dreary's labor efficiency variance for this last pay period

Question

Dana Oneal

Business

13 April, 15:22

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 Dreary's labor efficiency variance for this last pay period

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Answers (1)

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Jaslene Morales · Answer 1

The labor efficiency variance for this last pay period was $1,200 Favorable.

Explanation:

In order to calculate Dreary's labor efficiency variance for this last pay period, we have to calculate first the standard hours allowed for actual work using the following formula:

Standard hours

allowed for actual work = (Total number of applications) * number of

Standard number of applications hours worked

= (2.500 applications) * 8 hours

10 applications

=2,000 hours

After having calculated the Standard hours allowed for actual work, we can calculate the labor efficiency variance using the following formula:

labor efficiency variance = (Actual hours worked-Standard hours allowed for actual work) * standard rate

= (1,920-2,000) * $15

=-$1,200

The Labor efficiency variance is $1,200 Favorable.