Answer (B) is correct.
The direct labor efficiency variance equals the difference between the
standard and actual amounts of labor hours times the standard rate. The
standard rate is $10 per hour. The actual amount of labor hours is 3,200
hours. The standard amount of labor hours is 3,000 (2 hours × 1,500
units). Thus, the direct labor efficiency variance is $2,000 [(3,000 –
3,200) × $10]. The variance is unfavorable because more labor hours
were used than the standard.