
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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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 direct labour rates per hour are not changed during the year to reflect events such
as a new labour contract

Transcribed Image Text: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
rate
Standard direct labour
hours allowed,
given April output
Labour class III
Labour class II
Labour class I
per hour
$26.00
$22.00
$12.00
1 000
1 000
1 000
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
per hour
$28.00
Actual direct labour hours
Labour class III
1 100
Labour class II
$23.00
1 300
Labour class I
$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.
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