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Gray Corp. employees work 2 hours on each of the 200 units that they produce and are paid $8 per hour. The standards for Gray Corp. indicate that employees should be paid $7 per hour and should spend 1.75 hours working on each unit. What is the Direct Labor Efficiency Variance

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Answer:

Direct labor time (efficiency) variance= $400 unfavorable

Explanation:

Giving the following formula:

Standard= $7 per hour and should spend 1.75 hours working on each unit.

Actual= 2 hours

To calculate the direct labor efficiency variance, we need to use the following formula:

Direct labor time (efficiency) variance= (Standard Quantity - Actual Quantity)*standard rate

Direct labor time (efficiency) variance= (200*1.75 - 200*2)*8

Direct labor time (efficiency) variance= $400 unfavorable

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