Question

Preble Company manufactures one product. Its variable manufacturing overhead is applied to production based on direct labour-hours, and its standard costs per unit are as follows: 55.00 36.00 Direct materials: 5 $ kg at $11.00 per kg Direct labour: 3 hours at $12 per hour Variable overhead: 3 hours at $7 per hour 21.00 $ 112.00 Total standard cost per unit The company planned to produce and sell

Answer 1

Labor efficiency variance =SHSR-AHSR

Standard hours for actual production = SH= 26,600 units *3 standard hours per unit = 79,800 hours

SR= Standard Rate = $12 per hour

AH = Actual hours = 63,000 hours

Labor efficiency variance = SR(SH-AH)

=$12 (79,800-63,000)

=$201,600 favorable[As the actual hours < standard hours that should have been used for 26,600 units the variance is favorable]

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