Operational variance (Kaplan Grayshott Co 260.3)

Dear Sir, Could you please help me with this question? The question asks us to calculate the operational variance, which should normally be the difference between the actual and the revised amount. However, in the solution they used 8 (the budgeted rate) and then calculated the actual amount as 8 × 1.25 = 10. I do not see any “revised amount” in the question, so I am confused about this calculation. Could you clarify it for me, please? ---- Marcus manages production and sales of product MN at Grayshott Co. Marcus has been asked to attend a meeting with Grayshott Co’s finance director to explain the results for product MN in the last quarter. Budgeted and actual results for product MN were as follows: Sales volume (units) Budget: 40,000 Actual: 38,000 Labour (2 hours at $8 per hour) Budget: 640,000 Actual: 798,000 There was no opening and closing inventory in the last quarter. Grayshott Co operates a marginal costing system. Marcus is angry about having to attend the meeting as he has no involvement in setting the original budget and he believes that the adverse results are due to the following circumstances which were beyond his control: (1) A decision by Grayshott Co’s board to increase wages meant that the actual labour rate per hour was 25% higher than budgeted. This decision was made in response to a request by the production department to enable it to meet a large, one-off customer order in the last quarter At present Grayshott Co does not operate a system of planning and operational variances and Marcus believes it should do so. Question: What was the labour rate operational variance for product MN for the last quarter? $159,600 Favourable $159,600 Adverse $160,000 Favourable $160,000 Adverse