COST ACCOUNTING
STANDARD COSTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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standard hours exceed actual hours
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actual hours exceed standard hours
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standard rate and standard hours exceed actual rate and actual hours
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actual rate and actual hours exceed standard rate and standard hours
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Detailed explanation-1: -actual hours exceed standard hours. A debit balance in the labor-efficiency variance account indicates that: budget at actual levels of activity reached and fixed overhead applied.
Detailed explanation-2: -The difference between actual labor hours to standard labor hours required to produce actual output is labor efficiency variance. If the actual labor hours consumed are less than the standard hours allowed is expressed as favorable labor efficiency variance.
Detailed explanation-3: -What is the Labor Efficiency Variance? The labor efficiency variance measures the ability to utilize labor in accordance with expectations. The variance is useful for spotlighting those areas in the production process that are using more labor hours than anticipated.
Detailed explanation-4: -A favorable labor rate variance indicates that the standard rate exceeds the actual rate. Labor rate variance is the difference between the standard labor rate per hour and the actual labor rate per hour, multiplied by the actual hours incurred. If the standard rate is greater than the actual rate, it is favorable.
Detailed explanation-5: -Labor Efficiency Variance Formula Labor efficiency variance equals the number of direct labor hours you budget for a period minus the actual hours your employees worked, times the standard hourly labor rate.