The following information describes a company's usage of direct labor in a recent period: Actual direct labor hours used Actual rate per hour Standard rate per hour Standard hours for units produced How much is the direct labor efficiency variance?

a) $26,000 Favorable

Explanation:

The Direct labor efficiency variance checks the how well staff are actually utilizing labor hours vs how they are expected to be utilizing it and is calculated by the formula;

Direct Labor Efficiency variance = (Standard hours – Actual hours) x Standard rate

Direct Labor Efficiency variance = ( 43,000 - 41,000 ) * 13

Direct Labor Efficiency variance = $26,000

As the Standard hours are higher than the actual hours used, this is considered a Favorable Variance.

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