Breedons Ltd use standard costing and variance analysis in order to control their costs. At the end of December 2022, they calculated the labour variances to be: Labour rate variance Labour efficiency variance During December 300 units were produced taking 180 hours at a cost of £1,530. The standard time per unit was 0.50 hours at a standard rate of £8 per hour. £90A £240A Due to the variances being adverse, further investigation was undertaken to determine the causes and it was identified that the standard time per unit had been set assuming skilled workers would be used. Breedons were using semi-skilled workers who worked slower and consequently the standard hours should be increased by 15%. Required: Calculate the planning and operational variances in relation to labour efficiency. Prove your calculation is correct and identify which of your calculated variances is controllable.

Breedons Ltd use standard costing and variance analysis in order to control their costs. At the end of December 2022, they calculated the labour variances to be: Labour rate variance Labour efficiency variance During December 300 units were produced taking 180 hours at a cost of £1,530. The standard time per unit was 0.50 hours at a standard rate of £8 per hour. £90A £240A Due to the variances being adverse, further investigation was undertaken to determine the causes and it was identified that the standard time per unit had been set assuming skilled workers would be used. Breedons were using semi-skilled workers who worked slower and consequently the standard hours should be increased by 15%. Required: Calculate the planning and operational variances in relation to labour efficiency. Prove your calculation is correct and identify which of your calculated variances is controllable.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The management accountant of a business is calculating the monthly variances to review and control performance.The company makes and sells one product and uses full absorption costing.The product has the following standard costs per unit:Direct materials £15 Direct labour £10 Production overhead £6The company planned to sell 1,000 units at a price of £50.Actual sales were 1,150 units and a total revenue of £56,350What was the sales volume profit variance for the month, stating clearly whether it was favourable or adverse?
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Information for Garner Company's direct-labor costs for the month of September 2005 was as follows: Actual direct-labor hours Standard direct-labor hours Total direct-labor payroll Direct-labor efficiency variance-favorable Answer: 34,500 hours 35,000 hours $241,500 $3,200 What is Garner's direct-labor price (or rate) variance? Be sure to label the variance favorable or unfavorable.
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