During October, 16,000 direct labour hours were worked at a standard cost of £6 per hour. If the labour rate variance for October was £4,000 unfavourable, the actual cost per labour hour must be
A)£6.25.
B)£6.00.
C)£5.75.
D)none of the above.

Question

Quizplus · Accepted Answer

The labour rate variance formula is (Actual Hourly Rate - Standard Hourly Rate) x Actual Hours Worked. Given a £4,000 unfavourable variance, this means the actual cost was higher than the standard. The calculation is £4,000 / 16,000 hours = £0.25 per hour over the standard £6.00, making the actual cost £6.25 per hour.

During October, 16,000 Direct Labour Hours Were Worked at a Standard