Parnassus Products Limited's labour budget for January 20X3 comprised 1.75 hours of direct labour input at a standard rate of £7.60 per hour, for each unit of production.The actual labour rate paid in the month was £7.70 and the figure for actual hours input per unit of product was 1.72.The actual sales and production level for the month was 1227 units. What was the total labour variance (i.e.the total of the labour rate and the labour efficiency variances) for January 20X3?

Question

Quizplus · Accepted Answer

The total labour variance is calculated by combining the labour rate variance and the labour efficiency variance. The labour rate variance is (Actual Rate - Standard Rate) x Actual Hours = (£7.70 - £7.60) x (1.72 x 1227) = £211.05. The labour efficiency variance is (Actual Hours - Standard Hours) x Standard Rate = (1.72 x 1227 - 1.75 x 1227) x £7.60 = -£142.34. The total labour variance is £211.05 - £142.34 = £68.71.

Parnassus Products Limited's Labour Budget for January 20X3 Comprised 1