Multiple Choice QuestionXYZ Company makes one product and has calculated the following amounts for direct labor: AH x AR = $84,000; AH x SR = $83,000; SH x SR = $85,000. Compute the labor efficiency variance.Multiple choice question.$1,000 U$2,000 F$2,000 U$1,000 F
Question
Multiple Choice QuestionXYZ Company makes one product and has calculated the following amounts for direct labor: AH x AR = 83,000; SH x SR = 1,000 U2,000 U$1,000 F
Solution
The labor efficiency variance is calculated as follows:
Labor Efficiency Variance = (Standard Hours - Actual Hours) x Standard Rate
From the given information, we can derive the following:
AH x AR = 83,000 (Actual Hours x Standard Rate) SH x SR = $85,000 (Standard Hours x Standard Rate)
We can find the Standard Rate (SR) by dividing the total cost at standard hours by the standard hours. However, we don't have the actual values for standard hours (SH) and actual hours (AH).
But we can use the given equations to find the labor efficiency variance.
The difference between (AH x SR) and (SH x SR) will give us the labor efficiency variance.
So, Labor Efficiency Variance = AH x SR - SH x SR = 85,000 = -$2,000
The negative sign indicates that it is unfavorable. So, the labor efficiency variance is $2,000 Unfavorable.
So, the correct answer is "$2,000 U".
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