Benson Company manufactures special metallic materials for luxury homes that require highly skilled labor. Benson uses standard costs to prepare its flexible budget. For the first quarter of the year, direct materials and direct labor standards for one of their popular products were as follows: Direct materials: 2 pounds per unit; $ 4 per pound Direct labor: 4 hours per unit; $ 14 per hour Benson produced 5 comma 000 units during the quarter. At the end of the quarter, an examination of the labor costs records showed that the company used 30 comma 000 direct labor hours and actual total direct labor costs were $ 240 comma 000. What is the direct labor efficiency variance?

Direct labor efficiency variance= $140,000 unfavorable

Explanation:

Giving the following information:

Standard requirements:

Direct labor:

4 hours per unit

$ 14 per hour

Benson produced 5,000 units during the quarter.

Actual cost:

Actual direct labor hours= 30,000

direct labor costs= $240,000

First, we need to calculate the standard total direct labor hours required to produce 5,000 units.

Total direct labor hours= 5,000*4= 20,000 hours

Now, we can calculate the direct labor efficiency variance:

Direct labor efficiency variance= (Standard Quantity - Actual Quantity)*standard rate

Direct labor efficiency variance= (20,000 - 30,000)*14= $140,000 unfavorable

It is unfavorable because the company used more direct labor hours than estimated.

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