The actual cost of direct labor per hour is 16.00 and the standard cost of direct labor per hour is 15.50. The direct labor hours allowed per finished unit is. 5 hour. During the current period, 5500 units of finished goods were produced using 3000 direct labor hours. How much is the direct labor efficiency variance?

Answer: $3,875 Favorable

Explanation: We can compute direct labor efficiency variance by using following formula : -

Direct labor efficiency variance = standard rate (actual hours - standard hours)

where,

standard hours = 5,500units * 0.5 hour = 2750 hours

actual hours = 3,000 hours

standard rate = $15.5

putting the values into equation we get : -

Direct labor efficiency variance = $15.5 (3,000 - 2750)

= $3,875 Favorable