Question

The direct labor efficiency variance is caused by
A. Lack of efficiency in preparing the budget.

B. Using more or less direct labor than the standard allows.

C. Setting a higher or lower wage standard than is practical.

D. Paying more or less for direct materials than the standard allows.

Assembly line workers at Thompson Manufacturing worked a total of 12,000 direct labor hours to produce 36,000 units. The standard for producing one unit is 15 minutes at a wage rate of $10. If the actual wage rate was $10.50 per direct labor hour, Thompson’s direct labor rate variance is
A. $6,000 favorable

B. $6,000 unfavorable

C. $4,500 favorable

D. $4,500 unfavorable

Answer 1

Part 1)

The correct answer is

B) Using more or less direct labor than the standard allows

Explanation

direct labour effeciency variance refers to the variance which arises due to more or less direct labour hours used in producing the units as compared to standard hours.

Part 2)

The correct answer is

B) $ 6000 Unfavourable

calculation

direct labour rate variance

= (actual rate - standard rate ) * actual hours

= ( 10.5-10) * 12000

= 126000-120000

= $ 6000 Unfavourable

Thus the correct answer is B) $ 6000 Unfavourable