31 Teddys Tables has labor standards of 3 hours per table at

-31 Teddy\'s Tables has labor standards of 3 hours per table at a rate of $15 per hour. Workers actual worked 210 hours to complete 75 tables. Workers were paid $15.50 per hour.What is the labor efficiency variance? A. $75.00 F B. $225.00 F C. $232.50 F D. $1,350.00 F

Solution

Solution:

Labor Efficiency / Quantity / Usage Variance

Labor Efficiency Variance – It arises due to variation in the working hours from the set standard.

Labor Efficiency Variance

Standard Hours Allowed for actual production:

Actual Production

75

Tables

x Allowed Standard Hours Per Table

3

hours

Total Standard Hours Allowed for actual production (SHAP)

225

hours

Actual Labor Hours Worked (AH)

210

hours

Variance or Difference in Hours (SHAP - AH)

15

hours

x Standard Hourly Rate (SHR)

$15

per hour

Labor Efficiency Variance

$225

Favorable

Labor Efficiency Variance is Favorable because the Actual Hours Worked is lesser than the allowed standard hours.

Hence, the correct option is B. $225 Favorable (F)

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Labor Efficiency Variance
Standard Hours Allowed for actual production:
Actual Production	75	Tables
x Allowed Standard Hours Per Table	3	hours
Total Standard Hours Allowed for actual production (SHAP)	225	hours
Actual Labor Hours Worked (AH)	210	hours
Variance or Difference in Hours (SHAP - AH)	15	hours
x Standard Hourly Rate (SHR)	$15	per hour
Labor Efficiency Variance	$225	Favorable