The following labour standards have been established for a particular product:$\begin{array}{ll}
\text { Standard labour hours per unit of output }&8.10 \text { hours }\
\text { Standard labour rate }&£ 14.40 \text { per hour }
\end{array}$

The following data pertain to operations concerning the product for the last month:Actual hours worked $\quad 8,700$ hours
Actual total labour cost $£ 129,195$
Actual output $\quad $ $\quad $ $\quad $1,000 units
- What is the labour rate variance for the month?

A)£450 F
B)£3,915 F
C)£3,915 U
D)£450 U

Question

The following labour standards have been established for a particular product:$\begin{array}{ll}
\text { Standard labour hours per unit of output }&8.10 \text { hours }\
\text { Standard labour rate }&£ 14.40 \text { per hour }
\end{array}$
 
The following data pertain to operations concerning the product for the last month:Actual hours worked $\quad 8,700$ hours
Actual total labour cost $£ 129,195$
Actual output $\quad $ $\quad $ $\quad $1,000 units
- What is the labour rate variance for the month?

A)£450 F
B)£3,915 F
C)£3,915 U
D)£450 U

Quizplus · Accepted Answer

The labour rate variance is calculated as (Actual hours worked x (Actual rate - Standard rate)). The actual rate is £129,195 / 8,700 hours = £14.85. The variance is 8,700 x (£14.85 - £14.40) = £3,915 Unfavorable (U).

The Following Labour Standards Have Been Established for a Particular