Labor Efficiency Variance

*Note this question builds on question 7

The labor efficiency variance (also called the labor usage variance) is a measure of worker productivity.

The labor efficiency variance is computed by multiplying the standard hourly wage rate by the difference between the standard hours allowed and actual hours used. Bruce allows 900 standard labor hours to produce 600 beams (600 units 1.5 hours per unit).

Standard hourly Labor rate $13

Timecards show that 2,075 Actual direct labor hours were used in March.

8. Compute the labor efficiency variance

Given that 2,075 hours were actually required, the companys unfavorable labor efficiency variance for March is computed as follows.

Labor Efficiency Variance = Standard Hourly labor Rate (Standard labor Hours Actual Direct labor Hours)