Answer (D) is correct . The standard inputs per unit of output can be determined by dividing the budgeted total input hours (10,000) by the budgeted total output level (5,000), giving 2 hours of direct labor for every finished unit. Since the actual output level was 6,000, the “expected” quantity, or number of hours allowed given the achieved level of production, was 12,000 (6,000 × 2). These amounts can be substituted in the formula for the efficiency variance: (EQ – AQ) × SP = Labor efficiency variance (12,000 – AQ) × $15 = $1,500 U 12,000 – AQ = 100 AQ = 12,100
Answer (A) is incorrect because Using the static budget inputs for 5,000 units and reversing the sign of the variance results in 9,900?hours.
Answer (B) is incorrect because Using the static budget inputs rather than the “expected” inputs results in 10,100 hours.
Answer (C) is incorrect because Treating the labor efficiency variance as favorable results in 11,900 hours.
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During May, 6,000 units were produced and the direct labor efficiency variance was $1,500 unfavorable. Based on this information, the actual number of direct labor hours used in May was