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Homework answers / question archive / Mid City Products Inc

Mid City Products Inc

Management

Mid City Products Inc.? (MCP), developed standard costs for direct material and direct labor. In? 2020, MCP estimated the following standard costs for one of their most popular products.

Budgeted quantity

Budgeted price

Direct materials

5 pounds

$6.60 per pound

Direct labor

0.4 hours

$13.00 per hour

During? September, MCP produced and sold 2,000 units using 10,300 pounds of direct materials at an average cost per pound of $6.00 and 750 direct labor hours at an average wage of $13.25 per hour.

The direct labor efficiency variance during September is? ________.

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Computation of Direct Labor Efficiency Variance:

Direct Labor Efficiency Variance = (Standard Hours - Actual Hours)*Standard Rate 

Here,

Standard Hours = 2,000 units*0.4 hours = 800 hours

Actual Hours = 750 hours

Standard Rate = $13 per hour

 

Direct Labor Efficiency Variance = (800 hours - 750 hours)*$13 = $650 Favorable

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