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18 January, 13:05

Lion Company's direct labor costs for the month of January were as follows: What was Lion's direct labor efficiency variance? Select one: a. $6,000 favorable b. $6,150 favorable c. $6,300 favorable d. $6,450 favorable

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  1. 18 January, 14:46
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    Direct labor time (efficiency) variance = $6,150 favorable

    Explanation:

    Giving the following information:

    Lion Company's direct labor costs for the month of January were as follows:

    Actual total direct labor-hours 20,000

    Standard total direct labor-hours 21,000

    Direct labor rate variance - unfavorable $3,000

    Total direct labor cost $126,000

    First, we need to calculate the standard direct labor hour cost.

    Direct labor rate variance = (Standard Rate - Actual Rate) * Actual Quantity

    Actual rate = 126,000/20,000 = 6.3

    -3,000 = (SR - 6.3) * 20,000

    -3,000 = SR20,000 - 126,000

    123,000/20,000 = SR

    6.15 = Standard rate

    To calculate the direct labor efficiency variance, we need to use the following formula:

    Direct labor time (efficiency) variance = (Standard Quantity - Actual Quantity) * standard rate

    Direct labor time (efficiency) variance = (21,000 - 20,000) * 6.15

    Direct labor time (efficiency) variance = $6,150 favorable
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