ACCA Applied Knowledge · Management Accounting · Variance calculations and analysis
Corvin Ltd's standard labour rate is $12 per hour. During June, 5,000 hours were paid for at a total cost of $62,000. What is the labour rate variance?
The labour rate variance is $2,000 adverse. Five thousand hours at the standard $12 rate should cost $60,000, but the business paid $62,000, so it spent $2,000 more than the standard rate allows, which is an adverse variance.
- A$2,000 adverseCorrect
- B$2,000 favourable
- C$62,000 adverse
- D$1,200 adverse
Explanation
Actual hours paid at standard rate: 5,000 x $12 = $60,000. Actual cost was $62,000, so the rate variance is $2,000 adverse. Treating it as favourable reverses the sign, since actual cost exceeds standard cost.
Did you get it right without looking?
One question tells you little. A timed set on Variance calculations and analysis shows your real accuracy, how long you take and where you lose marks.
More Variance calculations and analysis questions
- Standard labour is 3 hours per unit at $12.00 per hour. Dorset Co produced 1,200 units, using 3,750 hours at an actual rate of $12.40 per ho…
- A company's fixed overhead expenditure variance is $2,000 adverse and its volume variance is $5,000 favourable. What is the total fixed over…
- Fenwick Co uses a standard of 2 hours per unit at $9 per hour. Actual output was 2,500 units. Actual hours paid were 5,200, of which 200 wer…
- Zeta Ltd uses standard marginal costing. Budgeted sales were 2,000 units and actual sales were 2,150 units. The standard contribution is $12…
- Brindle Co has a standard labour rate of $9 per hour. In June, 3,200 hours were paid at an actual cost of $30,080, of which 150 hours were r…
- Kestrel Ltd budgeted fixed production overheads of $60,000 for the period, based on 12,000 units at 2 labour hours per unit. Actual fixed ov…