Question

Standard cost of product is :
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.

Answer 1

The answer is shown below:

Explanation:

The computation is shown below:

1. Direct Labor Cost Variance

As we know that

= (Standard time × Standard rate) - (Actual time × Actual rate)

where,

Standard time is

= 1,500 units × Rs 4 per hour

= 9,000 units

So,

= (9,000 × 4) - (8,000 × 5)

= Rs. 4,000 unfavorable

(ii)Direct Labor Rate Variance is

= Actual time × (Standard rate - Actual rate)

= 8,000 × (4 - 5)    

= Rs 8000 unfavorable

(iii) Direct Labor Idle Time Variance is

= Idle time × Standard rate

= 400 × 4

= Rs. 1600  unfavorable

(iv)Direct Labor Efficiency Variance is

= Standard rate × (Standard time - Actual time)

= 4 × (9000 - 7600)

= Rs.5,600 favorable

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