Question

QUESTION)

Meow Products Ltd. in the US produces and sells scratching posts for cats. In the current year, the company had expected to sell 12 000 posts but actually produced and sold 10 000 posts. The following information is available regarding the standard cost to produce a single post:

Direct materials: 3 feet @ 1.75 per foot

Direct labour: 15 minutes @ $0.30 per minute

In the current year, 38 000 feet of material were purchased out of which 35 000 feet were used at a cost of $1.55 per foot, and 160 000 direct labour minutes were incurred at a cost of $0.32 per minute. The company’s direct labour efficiency variance for the current year was:

a. $12 000 F
b. $3000 F
c. $12 000 U
d. $3000 U

Answer 1

Answer

• Correct Answer = Option ‘D’ $ 3000 U

Labour Efficiency Variance
(	Standard Hours = 10000 posts x 15 minutes	-	Actual Hours	)	x	Standard Rate
(	150000	-	160000	)	x	$                           0.30
	-3000
	Variance		$              3,000.00			Unfavourable-U