Answered: Falmer Ltd makes product Mull. In…

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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Question

Falmer Ltd makes product Mull. In January 2023, when the budget was first prepared, standard labour cost per hour was £8.33 and it should require one hour to make each unit of Mull. In February 2023, staff received a 3% pay rise and labour time required per unit increased by 10%. Falmer has just produced 2,000 units of product Mull in April, using 2,200 hours at a labour cost of £18,700. What is the planning labour rate variance?

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

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