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2 October, 01:54

Dreary Credit Agency uses a standard cost system for the processing of its credit applications. The labor standard at Dreary is 10 applications per 8 hour day at a standard cost of $15 per hour. During the last pay period, Dreary's credit agents worked 1,920 hours and processed 2,500 applications. The total labor cost for the agents during this period was $29,184. What was Dreary's labor efficiency variance for this last pay period

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  1. 2 October, 02:14
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    The labor efficiency variance for this last pay period was $1,200 Favorable.

    Explanation:

    In order to calculate Dreary's labor efficiency variance for this last pay period, we have to calculate first the standard hours allowed for actual work using the following formula:

    Standard hours

    allowed for actual work = (Total number of applications) * number of

    Standard number of applications hours worked

    = (2.500 applications) * 8 hours

    10 applications

    =2,000 hours

    After having calculated the Standard hours allowed for actual work, we can calculate the labor efficiency variance using the following formula:

    labor efficiency variance = (Actual hours worked-Standard hours allowed for actual work) * standard rate

    = (1,920-2,000) * $15

    =-$1,200

    The Labor efficiency variance is $1,200 Favorable.
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