Aztec Bromac budgeted the following cost standards for the current year: Direct materials = 2.8 kilos per unit @ $3.00 per kilo
Direct labour = 1.5 hours per unit @ $6 per hour
Actual production and costs were as follows:
Units produced = 3,600
Direct materials used = 9,000 kg.
Direct materials purchased = 10,000 kg. @ a cost of $29,000
Direct labour incurred = 4,000 hours at a cost of $26,000
The labour price variance was:
A) $600 F
B) $6,400 U
C) $2,000 F
D) $2,000 U

Question

Quizplus · Accepted Answer

The labour price variance is calculated as (Actual Hourly Rate - Standard Hourly Rate) x Actual Hours Worked. The standard rate is $6 per hour, and the actual rate is $26,000 / 4,000 hours = $6.50 per hour. Thus, the variance is ($6.50 - $6) x 4,000 = $2,000 Unfavorable.

Aztec Bromac Budgeted the Following Cost Standards for the Current