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 per hour Labour class III Labour class II Labour class I Standard direct labour hours allowed, given April output 1,000 1,000 1,000 $26.00 $22.00 $12.00 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 Actual direct labour hours Labour class II $28.00 1,100 Labour class II $23.00 1,300 Labour class I $14.00 750 Required: a) Calculate the following variances for April, indicating whether each is favourable or unfavourable: i direct labour rate variance for each labour class. ii direct labour efficiency variance for each labour class. b) 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.

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 per hour Labour class III Labour class II Labour class I Standard direct labour hours allowed, given April output 1,000 1,000 1,000 $26.00 $22.00 $12.00 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 Actual direct labour hours Labour class II $28.00 1,100 Labour class II $23.00 1,300 Labour class I $14.00 750 Required: a) Calculate the following variances for April, indicating whether each is favourable or unfavourable: i direct labour rate variance for each labour class. ii direct labour efficiency variance for each labour class. b) 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.

Name: The accountant for Barry Ltd compares each month's actual results wit
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Description: The accountant for Barry Ltd compares each month's actual results with a monthly plan. The standarddirect labour rates and the standard hours allowed, given the actual output in April, are shown in thefollowing schedule:Standard direct labour rate p

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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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

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 per hour
Labour class III
Labour class II
Labour class I
Standard direct labour hours allowed,
given April output
1,000
1,000
1,000
$26.00
$22.00
$12.00
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
Actual direct labour hours
Labour class II
$28.00
1,100
Labour class II
$23.00
1,300
Labour class I
$14.00
750
Required:
a) Calculate the following variances for April, indicating whether each is favourable or unfavourable:
i direct labour rate variance for each labour class.
ii direct labour efficiency variance for each labour class.
b) 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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