Maria runs a bakery, baking and selling cakes for special occasions. Each cake requires 2 hours of direct labour for baking and decorating. Direct labour is paid at the rate of £8 per hour. During May, Maria expected to bake 400 cakes. However, due to additional demand, she baked 500 cakes and her total labour cost for the month was £7,938 for 980 hours of direct labour. What was Maria's direct labour total variance for the month of May?
A) £62 Favourable
B) £98 Unfavourable
C) £160 Favourable
D) £1,600 Unfavourable

Question

Quizplus · Accepted Answer

Maria's direct labour total variance is calculated by comparing the actual labour cost to the standard labour cost for the actual output. The standard labour cost for 500 cakes is 500 cakes * 2 hours/cake * £8/hour = £8,000. The actual labour cost was £7,938. Therefore, the variance is £8,000 - £7,938 = £62 Favourable.

Maria Runs a Bakery, Baking and Selling Cakes for Special