ABC PLC makes a single product. At the beginning of the budget year, the standard labour cost
Question:
ABC PLC makes a single product. At the beginning of the budget year, the standard labour cost was established as 8 per unit, and each unit should take 0.5 hours to make.
However, during the year, the standard labour cost was revised. A new quality control procedure was introduced to the production process, adding 20% to the expected time to for a unit. In addition, due to severe financial difficulties facing the company, the workforce reluctantly agreed to reduce the rate of pay to 15 per hour.
In the first month after revision of the standard cost, budgeted production was 15,000 units but only 14,000 units were actually produced. These took 8,700 hours of labour time, which cost 130,500.
Required
Calculate the labour planning and operational variances in as much detail as possible.
Cornerstones of Cost Management
ISBN: 978-1285751788
3rd edition
Authors: Don R. Hansen, Maryanne M. Mowen