Lion Company's direct labor costs for the month of January were as follows: Actual total direct labor-hours 20,000 Standard total direct labor-hours 21,000 Direct labor rate variance-unfavorable $3,000 Total direct labor cost $126,000 What was Lion's direct labor efficiency variance?

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16 August, 04:14

Lion Company's direct labor costs for the month of January were as follows: Actual total direct labor-hours 20,000 Standard total direct labor-hours 21,000 Direct labor rate variance-unfavorable $3,000 Total direct labor cost $126,000 What was Lion's direct labor efficiency variance?

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Rodrigo Brock · Answer 1

6,150 Favorable

Explanation:

Direct labor Efficiency variance:

Direct labor rate variance = (SR - AR) AH

Where,

AH = Actual labor hours

SR = Standard rate

AR = Actual rate

= Total direct labor cost : Actual total direct labor-hours

= $126,000 : 20,000

= 6.3

SH = Standard labor hours

- 3,000 = 20,000 (SR - 6.3)

- 3,000 = 20,000 * SR - 126,000

SR = $6.15

Labor Efficiency variance = (SH - AH) * SR

= (21,000 - 20,000) * 6.15

= 6,150 Favorable