Potters Limited uses a standard costing system for all its products. Potters Limited produces hand painted teapots. The standard direct labour time to paint one teapot is 1½ hours and the standard cost of labour is £20 per direct labour hour. Budgeted production is 1,500 teapots per month with budgeted monthly labour hours of 2,250. In October, Potters Limited produced 1,480 teapots and incurred total labour costs for painting the teapots of £43,659, paying £19.80 per hour for labour. What is the direct labour efficiency variance for October?
A) £300 Favourable
B) £441 Favourable
C) £600 Favourable
D) £741 Favourable

Question

Quizplus · Accepted Answer

Direct labour efficiency variance = (Standard direct labour hours - Actual direct labour hours) x Standard direct labour rate= (1,500 x 1.5) - 1,480 x 1.5) x £20= 1,500 - 2,220 x £20= £300 Favourable

Potters Limited Uses a Standard Costing System for All Its