Tharaldson Corporation makes a product with the following standard costs:
| Standard | Standard | ||
|---|---|---|---|
| Quantity or | Standard Price or | Cost Per | |
| Hours | Rate | Unit | |
| Direct materials | 6.0 ounces | $3.00 per ounce | $18.00 |
| Direct labor | 0.3 hours | $11.00 per hour | $3.30 |
| Variable overhead | 0.3 hours | $9.00 per hour | $2.70 |
The company reported the following results concerning this product in June.
| Originally budgeted output | 3,600 units |
|---|---|
| Actual output | 3,200 units |
| Raw materials used in production | 21,000 ounces |
| Purchases of raw materials | 22,100 ounces |
| Actual direct labor-hours | 500 hours |
| Actual cost of raw materials purchases | $42,300 |
| Actual direct labor cost | $13,600 |
| Actual variable overhead cost | $3,800 |
The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased.
The labor efficiency variance for June is:
>> Labor Efficiency variance = ( Standard Hours - Actual Hours ) * Standard Rate.
>> Standard Hours = ( 3,200 * 0.3 ) = 960 Hours.
>> Labor Efficiency Variance = ( 960 - 500 ) * $ 11
>> Labor Efficiency Variance = $ 5.060 Favorable.
Tharaldson Corporation makes a product with the following standard costs