The following labor standards have been established for a particular product. Predict the variance and interpret the cause of labor efficiency variance for the month. (Marking Scheme: 2 marks each * 5= 10 marks)

Standard labor hours per unit of output	4.5 hours
Standard labor rate	$ 12.30 per hour
Actual hours worked	7,100 hours
Actual total labor cost	$ 89,105
Actual output	1,500 units

The correct formula Standard Hours is:

a.

Actual output in units standard labor hours in units

b.

Actual output in units + Standard labor hours in units

c.

Actual output in units * Standard labor hours in units

The total standard hours are:

a.

6750 hours

b.

4750 hours

c.

6500 hours

The correct formula for Labor Efficiency Variance (LEV) is:

a.

Standard labor rate (actual hours worked + standard hours)

b.

Standard labor rate (actual hours worked standard hours)

c.

Actual hours worked (Standard labor rate standard hours)

The Labor Efficiency Variance (LEV) total is:

a.

$4,305

b.

3,530

c.

5,001

The predicted interpretation is

a.

Favorable

b.

Unfavorable

c.

Both