When auto manufacturer bmw purchased the rolls-royce brand name, bmw had to hire and train a new staff of assembly workers. the new workers were paid $25 per hour, worked a total of 7,500 hours, and produced 2,000 cars. bmw budgeted for a standard labor rate of $27 per hour and 1.25 direct labor hours per car. what is the direct labor efficiency variance for the rolls-royce division? a) $125,000 unfavorableb) $125,000 favorablec) $135,000 favorabled) $135,000 unfavorable

The correct answer is D: Direct labor variance= $135000 unfavorable.

Explanation:

Giving the following information:

The new workers were paid $25 per hour, worked a total of 7,500 hours, and produced 2,000 cars.

BMW budgeted for a standard labor rate of $27 per hour and 1.25 direct labor hours per car.

Direct labor variance= (SQ*AQ)*SP

SQ= standard quantity

AQ= actual quantity

SP= standard price

SQ= To produce 2000 cars, it will take 1.25*2000=2500 hours

AQ= 7500 hours

SP= $27

Direct labor variance= (2500-7500)*27= $135000 unfavorable.

It took a considerable amount of hours more than predicted.  

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