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21 August, 16:54

Toby Company has budgeted three hours of direct labor per recliner at a standard cost of $30 per hour. During January, 650 actual hours were worked, completing 200 recliners. All were sold and Toby Company's actually labor was $31 per hour. What is Toby Company's direct labor efficiency variance for January?

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  1. 21 August, 17:21
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    Direct labor efficiency variance=$1,500

    Explanation:

    Direct labor cost variance is the difference between the actual quantity of direct labor and the standard or budgeted quantity of direct labor multiplied by the standard cost of direct labor ...

    Step 1: Calculate Actual hours

    Actual hours=650 hours

    Step 2: Calculate the actual cost

    Actual cost=actual hours*actual rate

    Actual cost = (650 hrs*$31 per hour) = $20,150

    Step 3: Calculate the standard cost

    Standard cost=Total number of actual hours*standard rate

    where;

    Standard rate=$30 per hour

    Total number of Actual hours = (200*3) = 600 hours

    replacing;

    Standard cost = (600*30) = $18,000

    Step 4: Calculate the direct labor efficiency variance

    Efficiency variance = (Actual labor-budgeted labor) * standard price

    where;

    Actual labor=650 hours

    Standard labor=600 hours

    standard price=$30 per hour

    replacing;

    Direct labor efficiency variance = (650-600) * 30

    Direct labor efficiency variance = (50*30) = $1,500

    Direct labor efficiency variance=$1,500
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