GKM, Inc. is a manufacturer of furniture. At the beginning of February, it was estimated that each unit of Let the Light In would require 4 hours of direct labor, and the related direct labor cost was expected to equal $36 per unit of product. During February, the company logged 3,750 hours of direct labor hours to produce 1,000 units of Let the Light In. Direct laborers were paid at a rate of $9.15 per hour.
1. Which of the following statements is correct with regard to Let the Light In’s February production?
A. The direct labor hours expected for the actual output during the month were more than the actual direct labor hours logged during the month.
B. It is likely that the direct labor variances are not related since both the rate variance and the efficiency variance are unfavorable.
C. If the company used higher paid and more efficient workers than expected for production during the period, it was not "worthit."
D. The direct labor standard rate was greater than the direct labor actual rate during the month.
E. The total actual direct labor cost was higher than the total expected direct labor cost.

The statement that is correct with regard to Let the Light In’s February production is;

A. The direct labor hours expected for the actual output during the month were more than actual direct labor hours logged during the month

We know that the direct labor hours estimated was 4 labor hours per unit.

Then, Actual labor hours worked will be multiplied by total units

= 1000 units * 4 labor hour / unit

= 4,000 labor hours

We were told the company logged 3,750 hours of direct labor hours

= 3750 hours / 4 hour /unit

= 937.5 units

It means that labor is efficient because it consumed less hours and produce more units than expected.

The labor rate paid per hour was higher than expected

= 4 labor hours per unit * $9.15 / labor hour

= $36.6 per unit

In total, the cost of labor was lower than expected

= $9.15 per hour * 3,750 hours

= $34,312

Therefore, The direct labor hours expected for the actual output during the month were more than actual direct labor hours logged during the month.

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A. The direct labor hours expected for the actual output during the month were more than actual direct labor hours logged during the month

Explanation:

The direct labor hours estimated we 4 labor hours per unit. To calculate actual labor hours worked we multiply total units by 4 labor hours

1000 units * 4labor hour / unit = 4,000 labor hours

but actually labor hours we 3,750 hours

3750 hours / 4 hour /unit = 937.5 units

The labor is efficient as it consumed less hours and produce more units than expected.

The labor rate paid per hour was higher than expected

4 labor hours per unit * $9.15 / labor hour = $36.6 per unit

In total the cost of labor was lower than expected

$9.15 per hour * 3,750 hours = $34,312

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