Product N requires a standard amount of 3 labour hours per unit, at a standard rate of £9.50 per hour. The budget production for August was 1,300 units. During August, 1,400 units of product N were actually made and actual labour time charged to the product was 4,700 hours at a cost of £42,300.
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.
Product N requires a standard amount of 3 labour hours per unit, at a standard rate of £9.50 per hour. The budget production for August was 1,300 units.
During August, 1,400 units of product N were actually made and actual labour time charged to the product was 4,700 hours at a cost of £42,300.
What is the labour rate variance?
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