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variance-labour effiency variance

MSMolly Sum11y ago
Last month 27000 direct labour hours were worked at an actual cost of $236,385 and the standard direct labour hours of production were 29,880. The standard direct labour cost per hour was $8.50. What was the labour efficiency variance ? A.17,595 adverse , B.17,595 F , C.24,480 adverse D.24,480 F ( answer given is D) my working : budgeted hour 29,880 actual worked hours 27,000 variance 2,880 x $8.50 = $24,480 my answer is C but it is wrong , please explain why is favourable ? or the question must taken the actual cost compare with budgeted total cost which is : actual cost $236,685 budget cost $253,980 so the actual cost spend less therefore is favourable ? thank you.
John MoffatJohn MoffatTutor11y ago#1
It is favourable because they worked fewer hours than were expected - this saves money, therefore gives more profit, therefore is favourable.
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