Figure 4
Shannon Ltd.'s standard cost card contained the following information:
Direct labour: 1.25 hours x £8.00 per hour = £10.00
Shannon planned to make 12,000 units. Shannon actually made 10,000 units using 13,000 hours.
-Refer to Figure 4. If Shannon's actual labour cost was £136,500, Shannon's labour rate variance was
A) £32,500 unfavorable
B) £32,500 favorable
C) £6,500 unfavorable
D) £6,500 favorable

Question

Quizplus · Accepted Answer

The labour rate variance is calculated as (Actual rate - Standard rate) x Actual hours. In this case, the actual rate is £136,500 / 13,000 hours = £10.50 per hour. The standard rate is £8.00 per hour. Therefore, the labour rate variance is (£10.50 - £8.00) x 13,000 hours = £32,500 unfavorable.

Figure 4 Shannon Ltd.'s Standard Cost Card Contained the Following Information