Ten minutes of direct labour is needed to produce one unit of product and direct labour is paid $24 per hour. Budgeted output for the period is estimated to be 8000 units. Actual output for the period turns out to be 8500 units and actual labour costs are $36 200 What budgeted direct labour amount should actual direct labour costs be compared to in order to calculate a valid variance?
A) $32 000
B) $19 200
C) $20 400
D) $34 000

Question

Quizplus · Accepted Answer

The budgeted direct labour amount should be based on the actual output. For 8500 units, the budgeted labour hours are 8500 units * 10 minutes/unit = 85000 minutes = 1416.67 hours. At $24 per hour, the budgeted cost is 1416.67 hours * $24/hour = $34,000.

Ten Minutes of Direct Labour Is Needed to Produce One