Twister Pty Ltd has set direct labour standards of 3 hours per unit and $5 per hour. During the month 2900 hours at a total cost of $17 400 were used to produce 1000 units. Determine the total direct labour variance.
A) $2400 (F)
B) $2900 (F)
C) $2900 (U)
D) $2400 (U)

Question

Quizplus · Accepted Answer

The total direct labour variance is calculated as the difference between the actual cost and the standard cost. The standard cost for 1000 units at 3 hours per unit at $5 per hour is 1000 units * 3 hours/unit * $5/hour = $15,000. The actual cost is $17,400. Therefore, the variance is $17,400 - $15,000 = $2,400 unfavorable (U) because the actual cost is higher than the standard cost.

Twister Pty Ltd Has Set Direct Labour Standards of 3