Question

James Company manufactures t-shirts. During the year, it manufactured 250,000 t-shirts, using 2 hours of direct labor at a rate of $8.50 per hour. The materials and labor standards for manufacturing the t-shirts are: Direct materials (6 yards of fabric @ $3 per yard) $18 Direct labor (2.4 hours @ $8.00 per hour) 17 It took James 1,400,000 yards at $2.50 per yard to make the 250,000 t-shirts. What is James' labor efficiency variance?

a.$800,000 U

b.$850,000 F

c.$850,000 U

d.$800,000 F

Answer 1

Answer:

Option D is correct. i.e $800,000 F

[Labor efficiency variance = (Actual hours worked × Standard rate) - (Standard hours
allowed × Standard rate)]
ie LEV = (250000*2*8) - (250000*2.4*8) = $800,000 F