Standard cost of product is : (20)
Time : 6 hours per unit Rate : Rs 4 per hour Actual cost : Production 1,500 units Hours taken 7,600 units Idle time (in hours) 400 Total hours : 8,000 Total labour cost announced to Rs. 40,000. Calculate Labour Variance.
Answers
The direct labour variance is 5600 Rs
Explanation:
We are given that:
- Rate = Rs.4/hour
- Actual cost of production = 1500 units
- Time = 6 hours
- Hours taken = 7600 hours
- Idle Time = 400 hours
- Total hours = 8000 hours
Direct Labor Cost Variance = ( ST × SR ) - (AT - AR)
= (9000 x 4) - (8000 x 5)
= 4000 Rs.
ST= Standard Time = 1500 units × 6 hours
= 9000 units.
(ii) Direct Labor Rate Variance = AT(SR - AR)
= 8000 ( 4 - 5)
= 8000 Rs.
(iii) Direct Labor Idle Time Variance = IT × SR
=400 × 4
= 1600 Rs. ( This is unfavorable)
(iv) Direct Labor Efficiency Variance = SR(ST- AT)
=4 (9000 - 7600)
= 5600 Rs.