A company manufactures washing machines. The budgeted output is 1,500 washing machines each accounting period. The standard cost of each washing machine includes 0.25 hours of direct labour at £16 an hour. The following information is available for a particular accounting period: • 1,350 washing machines were made • 340 hours of labour were worked at the cost of £5,100 What are the labour rate and labour efficiency variances? A Labour rate £340 favourable; labour efficiency £40 favourable. B Labour rate £1,360 favourable; labour efficiency £160 favourable. C Labour rate £1,360 favourable; labour efficiency £160 adverse. D Labour rate £340 favourable; labour efficiency £40 adverse.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
A company manufactures washing machines. The budgeted output is 1,500 washing machines each accounting period. The
The following information is available for a particular accounting period:
• 1,350 washing machines were made
• 340 hours of labour were worked at the cost of £5,100
What are the labour rate and labour efficiency variances?
A Labour rate £340 favourable; labour efficiency £40 favourable.
B Labour rate £1,360 favourable; labour efficiency £160 favourable.
C Labour rate £1,360 favourable; labour efficiency £160 adverse.
D Labour rate £340 favourable; labour efficiency £40 adverse.
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