Q1. Describe the factors that managers may consider when assessing the significance of a variance. Why do we need to assess the significance of variances? Q2. Explain the type of environment in a service organisation that best suits the use of standard costs for control Q3. The accountant for Barry Ltd compares each month's actual results with a monthly plan. The standard direct labour rates and the standard hours allowed, given the actual output in April, are shown in the following schedule: Standard direct labour Standard direct labour rate hours allowed, given April output Labour class III $26.00 1 000 Labour class II $22.00 1 000 Labour class $12.00 1 000 per hour A new union contract negotiated in March resulted in actual wage rates that differed from the standard rates. The actual direct labour hours worked and the actual direct labour rates per hour for April were as follows. Actual direct labour rate Actual direct labour hours per hour Labour class III $28.00 1 100 Labour class 11 $23.00 1 300 Labour class $14.00 750 Required: 1. Calculate the following variances for April, indicating whether each is favourable or unfavourable: (a) direct labour rate variance for each labour class. (b) direct labour efficiency variance for each labour class. 2. Discuss two advantages and two disadvantages of a standard costing system in which the standard direct labour rates per hour are not changed during the year to reflect events such as a new labour contract