Company D provides the following information regarding its direct labour costs:

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Accepted Answer

If we compare the standard hours worked multiplied by the standard pay rate
(45 × £22 = £990), with the actual hours worked multiplied by the actual pay rate
(50 × £21 = £1,050), we see that there is an overall total direct labour variance of
£60 adverse. This can be further analysed, firstly, by calculating the pay rate variance,
comparing the standard pay rate of actual hours worked (50 × £22 = £1,100)
with the actual pay rate of the actual hours worked (50 × £21 = £1,050), resulting
in a favourable pay rate variance of £50. Secondly, the efficiency of the direct labour
workforce can be assessed by calculating the efficiency variance, comparing the
standard pay rate of standard hours worked (45 × £22 = £990) with the standard

pay rate of the actual hours worked (50 × £22 = £1,100), resulting in an adverse
efficiency variance of £110. These are summarised in Figure 11.5 below.

Question 11.2: Company D provides the following information regarding its d...

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	D
Standard hours per week	45
Standard pay rate per hour	£22
Actual hours worked in the week	50
Actual pay rate per hour	£21