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:

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

Required:

a) Calculate the following variances for April, indicating whether each is favourable or unfavourable

i direct labour rate variance for each labour class. 

ii direct labour efficiency variance for each labour class. 

b) 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 (150 words)

Transcribed Image Text:

Standard direct labour rate per hour Standard direct labour hours allowed, $26.00 $22.00 $12.00 given April output 1,000 1,000 1,000 Labour class III Labour class II Labour class I Standard direct labour rate per hour Standard direct labour hours allowed, $26.00 $22.00 $12.00 given April output 1,000 1,000 1,000 Labour class III Labour class II Labour class I

Answer rating: 100% (QA)

Answer a i Direct labour rate variance Standard rate Actual rateActual hou... View the full answer