In a certain standard costing system,the following results occurred last period: labour rate variance,$1,000 unfavourable; labour efficiency variance,$2,800 favourable; and the actual labour rate was $0.20 more per hour than the standard labour rate.What number of actual direct labour hours was used last period?
A) 4,800 hours.
B) 5,000 hours.
C) 5,400 hours.
D) 9,000 hours.

Question

Quizplus · Accepted Answer

We can use the formula for labour cost variance as follows:
Labour Cost Variance = (Actual Hours x Actual Rate) - (Standard Hours x Standard Rate)
We are given that labour rate variance was $1,000 unfavourable, which means that actual rate was $0.20 more than the standard rate. Therefore, we can calculate the standard rate as follows:
Actual Rate - Standard Rate = Labour Rate Variance / Actual Hours
0.20 = -1,000 / Actual Hours
Actual Hours = 5,000
Now we can use the labour efficiency variance to find the actual hours actually worked:
Labour Efficiency Variance = (Actual Hours - Standard Hours) x Standard Rate
2,800 = (Actual Hours - Standard Hours) x $10
Actual Hours - Standard Hours = 280
Actual Hours = Standard Hours + 280
Substituting the value of standard hours (which we do not know yet) gives us:
Actual Hours = Standard Hours + 280
5,000 = Standard Hours + 280
Standard Hours = 4,720
Therefore, the actual direct labour hours used last period was 5,000 hours (Option B).

In a Certain Standard Costing System,the Following Results Occurred Last