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ACCA Applied Skills · Performance Management · Standard costing

Delta Ltd's original standard labour rate was $14 per hour. Following a national wage agreement, the revised standard rate is $15.50. Actual hours worked were 2,000 and actual rate paid was $15.00. What is the total labour rate variance split into planning and operational?

Planning variance is $3,000 adverse because the revised standard rate is $1.50 above the original on 2,000 hours. Operational variance is $1,000 favourable because the actual rate of $15 was $0.50 below the revised standard of $15.50.

  1. APlanning $3,000 adverse; operational $1,000 favourableCorrect
  2. BPlanning $3,000 favourable; operational $1,000 adverse
  3. CPlanning $2,000 adverse; operational $1,000 favourable
  4. DPlanning $3,000 adverse; operational $2,000 favourable

Explanation

Planning: 2,000 x ($15.50 - $14.00) = $3,000 adverse. Operational: 2,000 x ($15.50 - $15.00) = $1,000 favourable. Total is $2,000 adverse, equal to 2,000 x ($15 - $14).

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