Managerial Accounting
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Pardoe, Inc., manufactures a single product in which variable manufacturing overhead is assigned on the basis of direct labor hours. The company uses a standard cost system and has established the following standards for one unit of product:
Standard Standard Price Standard
Quantity or Rate Cost
Direct materials 1.5 pounds $3.00 per pound $4.50
Direct labor 0.6 hours $6.00 per hour $3.60
Variable manufacturing overhead 0.6 hours $1.25 per hour $0.75
During March, the following activity was recorded by the company:
- The company produced 3,000 units during the month.
- A total of 8,000 pounds of material were purchased at a cost of $23,000.
- There was no beginning inventory of materials on hand to start the month; at the end of the month, 2,000 pounds of material remained in the warehouse.
- During March, 1600 direct labor hours were worked at a rate of $6.50 per hour.
- Variable manufacturing overhead costs during March totaled $1,800.
Reference: 10-4
The labor efficiency variance for March is:
$5,040 F
$1,200 U
$5,040 U
$1,200 F
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Solution contains calculation of labor efficiency variance for March.
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Lab Labour Efficiency Variance= Standeard rate( Actual ...
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