Lion company’s direct labor costs for the month of january were as follows: actual total direct labor-hours 20,000 standard total direct labor-hours 21,000 direct labor rate variance—unfavorable $3,000 total direct labor cost $126,000 what was lion’s direct labor efficiency variance?

6,150 Favorable

Explanation:

Direct labor Efficiency variance :

Direct labor rate variance = (SR - AR) AH

Where,

AH = Actual labor hours

SR = Standard rate

AR = Actual rate

     = Total direct labor cost ÷ Actual total direct labor-hours

     = $126,000 ÷ 20,000

     = 6.3

SH = Standard labor hours

-  3,000 = 20,000(SR - 6.3)

-  3,000 =  20,000 × SR -  126,000

        SR = $6.15

Labor Efficiency variance = (SH - AH) × SR

                                            = (21,000 - 20,000) × 6.15

                                            = 6,150 Favorable

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