Europa Company manufactures only one product. Presented below is direct labor information for November.
Standard direct labor hours per unit of product 3.90 Number of finished units produced 5,500 Standard wage rate per direct labor hour (SP)$19.90 Total direct labor payroll for the period$385,770 Actual wage rate per direct labor hour worked (AP)$16.70
The direct labor efficiency variance for November (to the nearest dollar) was:
$32,835 unfavorable.
1. Actual direct labor hours worked, AQ = Actual direct labor payroll (given)/Actual wage rate/hour (given) = (AQ × AP)/AP = $385,770/$16.70/labor hour = 23,100 actual direct labor hours worked.
2. Standard direct labor hours allowed for output produced = SQ = 5,500 units (given) × 3.90 hours/unit (given) = 21,450 hours.
3. Direct labor efficiency variance = (AQ ? SQ) × SP = (23,100 ? 21,450) hours × $19.90/hour (given) = $32,835 unfavorable, rounded to the nearest whole dollar.
Note: the variance is unfavorable (U) because actual labor hours worked (23,100) > standard labor hours allowed for units produced during the period (21,450).
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