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Actual hours used 5,500; Standard hours allowed 5,800; Actual labor rate $14.75 per hour; and Standard labor rate $14.00 per hour.  The labor efficiency variance is

Question

Actual hours used 5,500; Standard hours allowed 5,800; Actual labor rate 14.75perhour;andStandardlaborrate14.75 per hour; and Standard labor rate 14.00 per hour.  The labor efficiency variance is

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Solution

The labor efficiency variance can be calculated using the formula:

Labor Efficiency Variance = (Standard Hours - Actual Hours) * Standard Rate

Substituting the given values into the formula:

Labor Efficiency Variance = (5,800 hours - 5,500 hours) * 14.00perhourLaborEfficiencyVariance=300hours14.00 per hour Labor Efficiency Variance = 300 hours * 14.00 per hour Labor Efficiency Variance = $4,200

So, the labor efficiency variance is $4,200. This is a favorable variance because the actual hours used are less than the standard hours allowed.

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