Q3. The accountant for Barry Ltd compares each month's actual results with a monthly plan. The standard direct labour rates and the standard hours allowed, given the actual output in April, are shown in the following schedule: Standard direct labour rate Standard direct labour hours allowed, given April output Labour class III Labour class II Labour class I per hour $26.00 $22.00 $12.00 1 000 1 000 1 000 A new union contract negotiated in March resulted in actual wage rates that differed from the standard rates. The actual direct labour hours worked and the actual direct labour rates per hour for April were as follows. Actual direct labour rate per hour $28.00 Actual direct labour hours Labour class III 1 100 Labour class II $23.00 1 300 Labour class I $14.00 750 Required: 1. Calculate the following variances for April, indicating whether each is favourable or unfavourable: (a) direct labour rate variance for each labour class. (b) direct labour efficiency variance for each labour class. 2. Discuss two advantages and two disadvantages of a standard costing system in which the standard direct labour rates per hour are not changed during the year to reflect events such as a new labour contract.
Q3. The accountant for Barry Ltd compares each month's actual results with a monthly plan. The standard direct labour rates and the standard hours allowed, given the actual output in April, are shown in the following schedule: Standard direct labour rate Standard direct labour hours allowed, given April output Labour class III Labour class II Labour class I per hour $26.00 $22.00 $12.00 1 000 1 000 1 000 A new union contract negotiated in March resulted in actual wage rates that differed from the standard rates. The actual direct labour hours worked and the actual direct labour rates per hour for April were as follows. Actual direct labour rate per hour $28.00 Actual direct labour hours Labour class III 1 100 Labour class II $23.00 1 300 Labour class I $14.00 750 Required: 1. Calculate the following variances for April, indicating whether each is favourable or unfavourable: (a) direct labour rate variance for each labour class. (b) direct labour efficiency variance for each labour class. 2. Discuss two advantages and two disadvantages of a standard costing system in which the standard direct labour rates per hour are not changed during the year to reflect events such as a new labour contract.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
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.
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Question
1. Calculate the following variances for April, indicating whether each is favourable or
unfavourable:
(a) direct labour rate variance for each labour class.
(b) direct labour efficiency variance for each labour class.
2. Discuss two advantages and two disadvantages of a
standard direct labour rates per hour are not changed during the year to reflect events such
as a new labour contract
Transcribed Image Text:Q3. The accountant for Barry Ltd compares each month's actual results with a monthly plan.
The standard direct labour rates and the standard hours allowed, given the actual output in
April, are shown in the following schedule:
Standard direct labour
rate
Standard direct labour
hours allowed,
given April output
Labour class III
Labour class II
Labour class I
per hour
$26.00
$22.00
$12.00
1 000
1 000
1 000
A new union contract negotiated in March resulted in actual wage rates that differed from the
standard rates. The actual direct labour hours worked and the actual direct labour rates per
hour for April were as follows.
Actual direct labour rate
per hour
$28.00
Actual direct labour hours
Labour class III
1 100
Labour class II
$23.00
1 300
Labour class I
$14.00
750
Required:
1. Calculate the following variances for April, indicating whether each is favourable or
unfavourable:
(a) direct labour rate variance for each labour class.
(b) direct labour efficiency variance for each labour class.
2. Discuss two advantages and two disadvantages of a standard costing system in which the
standard direct labour rates per hour are not changed during the year to reflect events such
as a new labour contract.
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