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Mid City Products Inc
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? ________.
Expert Solution
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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