ADVANCE VARIANCES

Hi sir, goodmorning,

Question 2

Budget: 3,000 unit
Actual Sales and production: 3,600 unit

Material price per kg
Budget $40
Actual $38

Labour price per hour
Budget $30
Actual $33

Kg’s of material
Budget 5,000
Actual 4,500

Labour hours
Budget 6,000
Actual 7,000

Additional information
The actual labour rate for is 10% higher than the original budget.
6% of the labour rate cost increase from the original standard is due to an underestimation of a wage
award. The remaining 4% increase is due to poor short term decision making.

This question ask me to find the labour efficiency variance
Therefore the calculation will be
AHSR X SHSR

i just noticed that we need to use standard rate at a rate of $31.80( revised standard labour rate) instead of take the budget.

So my question is :
Is that correct if they give us budget and actual figure, we need to use the revised labour rate (as in question)(or any revised figure have in that question) instead of using budget labour rate when we calculate the standard labour rate?

And another one is, if we have budget and actual figure, and there is no revised at all in the question, we cannot take the budget rate to make it as standard rate. We need to use the actual rate as a standard rate?
Is it correct, sir? Correct me if I’m wrong 🙂

Thank you sir.