Transcribed Image Text: The accountant for Barry Ltd compares each month’s actual results with a monthly plan. The standard direct labour

Excerpt
ii direct labour efficiency variance for each labour class. b) Discuss two advantages and two disadvantages of a standard costing system in wch the standard direct labour rates per hour are not changed during the year to reflect events such as a new labour contract.

Transcribed Image Text: 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 per hour
Labour class III
Labour class II
Labour class I
Standard direct labour hours allowed,
given April output
1,000
1,000
1,000
$26.00
$22.00
$12.00
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
Actual direct labour hours
Labour class II
$28.00
1,100
Labour class II
$23.00
1,300
Labour class I
$14.00
750
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 wch 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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