Reference no: EM132607907
The Litton Company has established standards as follows:
Direct Material 3 kgs. @ $4/kg. = $12 per unit
Direct Labour 2 hrs. @ $8/hr. = $16 per unit
Variable Manufacturing Overhead 2 hrs. @ $5/hr. = $10 per unit
Actual production figures for the past year are given below. The company records the materials price variance when materials are purchased.
Units Produced 600
Direct Material Used 2,000 kgs.
Direct Material Purchased (3,000 kgs.) $11,400
Direct Labour Cost (1,100 hrs.) $9,240
Variable Manufacturing Overhead Cost Incurred $5,720
The company applies variable manufacturing overhead to products on the basis of direct labour hours.
Problem 1: What was the labour efficiency variance?
A) $840 favourable.
B) $800 unfavourable.
C) $800 favourable.
D) $840 unfavourable.