Reference no: EM132638373

Puvo, Inc., manufactures a single product in which variable manufacturing overhead is assigned on the basis of standard direct labor-hours.

The company uses a standard cost system and has established the following standards for one unit of product:

                              Standard Quantity                 Standard Price or Rate                 Standard Cost
Direct Materials               5.8 lbs                             $ 0.60 per lb                               $3.48
Direct Labor                  0.5 hrs                                $ 33.50 per hr                          $16.75
Variable manufacturing overhead 0.5 hrs                       $ 8.50 per hr                           $4.25

During March, the following activity was recorded by the company:

1. The company produced 2,400 units during the month.
2. A total of 19,400 pounds of material were purchased at a cost of $13,580. 
3. There was no beginning inventory of materials on hand to start the month; at the end of the month, 3,620 pounds of material remained in the warehouse. 
4. During March, 1,090 direct labor-hours were worked at a rate of $30.50 per hour. 
5. Variable manufacturing overhead costs during March totaled $14,061.

The direct materials purchases variance is computed when the materials are purchased.

Problem 1: The labor efficiency variance for March is:

Multiple Choice

Option 1: $3,685 F

Option 2: $3,040 U

Option 3: $3,685 U

Option 4: $3,040 F