Fletcher Company collected the following data regarding production of one of its products. Compute the direct labor efficiency variance. Direct labor standard (.50 hours @ $13.30/hour) $ 6.65 per finished unitActual direct labor hours 85,600 hoursActual finished units produced 171,100 unitsActual cost of direct labor $ 1,153,815
Question
Fletcher Company collected the following data regarding production of one of its products. Compute the direct labor efficiency variance. Direct labor standard (.50 hours @ 6.65 per finished unitActual direct labor hours 85,600 hoursActual finished units produced 171,100 unitsActual cost of direct labor $ 1,153,815
Solution
To calculate the direct labor efficiency variance, we need to follow these steps:
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Calculate the Standard Labor Hours: This is the amount of labor hours that should have been used for the actual number of units produced. It is calculated by multiplying the actual units produced by the standard labor hours per unit. In this case, it would be 171,100 units * 0.50 hours/unit = 85,550 hours.
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Calculate the Actual Labor Hours: This is given in the problem as 85,600 hours.
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Calculate the Labor Efficiency Variance: This is calculated by subtracting the standard labor hours from the actual labor hours and then multiplying by the standard labor cost per hour. In this case, it would be (85,600 hours - 85,550 hours) * 665 unfavorable.
The labor efficiency variance is unfavorable because the actual labor hours exceeded the standard labor hours, indicating that more time was spent on production than was planned.
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