Aqua Company produces aquariums. During the year, 150,000 aquariums were produced. Materials and labour standards for producing the aquariums are as follows:
Aqua purchased and used 310,000 sheets of glass at $1.50 per sheet, and its actual labour hours were 435,000 hours at a wage rate of $8.50 per hour.
$\begin{array}{lll}
\text {Direct materials ( 2 sheets of glass @$ \$ 2 $ per sheet) }&\$ 4\
\text { Direct labour (3 hours $ @ \$ 8 $ per hour)}&24\
\end{array}$

-Refer to the Figure.What is Aqua's total labour variance?
A)$97,500 U
B)$97,500 F
C)$120,000 U
D)$217,000 F

Question

Aqua Company produces aquariums. During the year, 150,000 aquariums were produced. Materials and labour standards for producing the aquariums are as follows:
Aqua purchased and used 310,000 sheets of glass at $1.50 per sheet, and its actual labour hours were 435,000 hours at a wage rate of $8.50 per hour.
 $\begin{array}{lll}
\text {Direct materials ( 2 sheets of glass @$ \$ 2 $ per sheet) }&\$ 4\
\text { Direct labour (3 hours $ @ \$ 8 $ per hour)}&24\
\end{array}$

-Refer to the Figure.What is Aqua's total labour variance?
A)$97,500 U
B)$97,500 F
C)$120,000 U
D)$217,000 F

Quizplus · Accepted Answer

The total labour variance is calculated by comparing the actual labour costs to the standard labour costs for the actual production. Standard labour cost = 150,000 aquariums * 3 hours per aquarium * $8 per hour = $3,600,000Actual labour cost = 435,000 hours * $8.50 per hour = $3,697,500Total labour variance = Actual labour cost - Standard labour cost = $3,697,500 - $3,600,000 = $97,500 UThe variance is unfavorable (U) because the actual labour cost is higher than the standard labour cost.

Aqua Company Produces Aquariums -Refer to the Figure