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A company has a budgeted labour cost of $180000 for the production of 30000 units per month.
Each unit is budgeted to take 3 hours of labour
The actual labour cost during the month is $160000 for 28000 units and 85000 hours were worked.What is the Favourable labour rate of pay variance ?
i know that the formula is (standard rate – actual rate) x actual hours
but how do i do this ?
please helpi managed to get 8000 :
$180000 divide by 30000 units = $6
28000 units x 6 = $168000 – $16000 = $8000 Favourable
but the answer is 10000 🙁
$6 is the standard cost per unit. For the labour rate of pay variance you need the standard cost per hour, which is 180,000 / (30,000 x 3) = $2.
So actual hours at standard cost are 85,000 x $2 = $170,000
Actual hours at actual cost is $160,000Variance is $10,000 favourable.
The free lecture on variances will help you 🙂
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