Question 22

Reference: 10-02

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.

What was the labour efficiency variance?

Question 22 options:

A)

$840 favourable.

B)

$800 unfavourable.

C)

$800 favourable.

D)

$840 unfavourable.