The following labour standards have been established for a particular product: $\begin{array}{lccc}
\text {Standard labour hours per unit of output }&\text {1.7 metres}\
\text {Standard labour rate}&\text {\$ 14.05 per metre}\
\end{array}$
The following data pertain to operations concerning the product for the last month: $\begin{array} { l r }
\text { Actual hours worked } & 3,700 \text { hours } \
\text { Actual total labour cost } & \$ 50,690 \
\text { Actual output } & 2,300 \text { units }
\end{array}$ What was the labour rate variance for the month?
A) $1,295 favourable.
B) $1,295 unfavourable.
C) $2,950 favourable.
D) $2950 unfavourable.

Question

The following labour standards have been established for a particular product: $\begin{array}{lccc}
\text {Standard labour hours per unit of output }&\text {1.7 metres}\
\text {Standard labour rate}&\text {\$ 14.05 per metre}\
\end{array}$
 The following data pertain to operations concerning the product for the last month: $\begin{array} { l r } 
\text { Actual hours worked } & 3,700 \text { hours } \
\text { Actual total labour cost } & \$ 50,690 \
\text { Actual output } & 2,300 \text { units }
\end{array}$ What was the labour rate variance for the month?
A) $1,295 favourable.
B) $1,295 unfavourable.
C) $2,950 favourable.
D) $2950 unfavourable.

Quizplus · Accepted Answer

The labour rate variance is calculated as (Actual hours worked x (Actual rate - Standard rate)). The actual rate is $50,690 / 3,700 hours = $13.70. The standard rate is $14.05. The variance is 3,700 x ($13.70 - $14.05) = $1,295 favourable.

The Following Labour Standards Have Been Established for a Particular