The accountant for Barry Ltd compares each month’s actual results with a monthly plan. The standarddirect labor rates and the standard hours allowed, given the actual output in April, are shown in thefollowing schedule:Standard direct labor rate per hour Standard direct labor hours allowed,given April outputLabour class III $26.00 1,000Labour class II $22.00 1,000Labour class I $12.00 1,000A new union contract negotiated in March resulted in actual wage rates that differed from thestandard rates. The actual direct labor hours worked and the actual direct labor rates per hour forApril was as follows.Actual direct labor rate per hour Actual direct labor hoursLabour class III $28.00 1,100Labour class II $23.00 1,300Labour class I $14.00 750Required:a) Calculate the following variances for April, indicating whether each is favorable or unfavorable:I direct labor rate variance for each labor class.ii direct labor efficiency variance for each labor class.b) Discuss two advantages and two disadvantages of a standard costing system in which the standarddirect labor rates per hour are not changed during the year to reflect events such as a new laborcontract.
The accountant for Barry Ltd compares each month’s actual results with a monthly plan. The standard
direct labor rates and the standard hours allowed, given the actual output in April, are shown in the
following schedule:
Standard direct labor rate per hour Standard direct labor hours allowed,
given April output
Labour class III $26.00 1,000
Labour class II $22.00 1,000
Labour class I $12.00 1,000
A new union contract negotiated in March resulted in actual wage rates that differed from the
standard rates. The actual direct labor hours worked and the actual direct labor rates per hour for
April was as follows.
Actual direct labor rate per hour Actual direct labor hours
Labour class III $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 favorable or unfavorable:
I direct labor rate variance for each labor class.
ii direct labor efficiency variance for each labor class.
b) Discuss two advantages and two disadvantages of a
direct labor rates per hour are not changed during the year to reflect events such as a new labor
contract.
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