Question

Benson Company manufactures special metallic materials for luxury homes that require highly skilled labor. Benson uses standard costs to prepare its flexible budget. For the first quarter of the​ year, direct materials and direct labor standards for one of their popular products were as​ follows: Direct​ materials: 2 pounds per​ unit; $ 4 per pound Direct​ labor: 4 hours per​ unit; $ 14 per hour Benson produced 5 comma 000 units during the quarter. At the end of the​ quarter, an examination of the labor costs records showed that the company used 30 comma 000 direct labor hours and actual total direct labor costs were $ 240 comma 000. What is the direct labor efficiency​ variance?

Answer 1

Answer:

Direct labor efficiency variance= $140,000 unfavorable

Explanation:

Giving the following information:

Standard requirements:

Direct​ labor:

4 hours per​ unit

$ 14 per hour

Benson produced 5,000 units during the quarter.

Actual cost:

Actual direct labor hours= 30,000

direct labor costs= $240,000

First, we need to calculate the standard total direct labor hours required to produce 5,000 units.

Total direct labor hours= 5,000*4= 20,000 hours

Now, we can calculate the direct labor efficiency variance:

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

Direct labor efficiency variance= (20,000 - 30,000)*14= $140,000 unfavorable

It is unfavorable because the company used more direct labor hours than estimated.