CMA Intermediate · Cost Accounting · Standard Costing and Variance Analysis
Standard labour rate for a job is ₹60 per hour. Actual wages paid to workers at Pune Fabricators were ₹1,26,000 for 2,000 hours worked. What is the labour rate variance?
The labour rate variance is ₹6,000 Adverse. The actual rate paid is ₹63 per hour against a standard of ₹60, so each of the 2,000 actual hours cost ₹3 extra, giving ₹6,000 more than standard cost.
- A₹6,000 AdverseCorrect
- B₹6,000 Favourable
- C₹3,000 Adverse
- D₹9,000 Adverse
Explanation
Labour rate variance = (Standard rate - Actual rate) x Actual hours. Actual rate = 1,26,000/2,000 = ₹63. Variance = (60 - 63) x 2,000 = ₹6,000 Adverse. Choosing Favourable reverses the sign.
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