After six months of comparing the business’s actual performance against budget, Sam is keen to understand why the labour costs are so high. Nina has given hima report on the variance analysis for the business’s direct labour costs (Table 12.12). She has told him that the budgeted labour rate was £10 per hour but that it had actually cost £10.50 per hour. Consider the reasons that these variances could have occurred.

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Table 12.12 Labour variances Tennis racquets Badminton racquets (12,000 sales units sold) (5,000 sales units sold) Budget direct labour 90,000 62,500 Actual direct labour 88,200 78,750 Variance 1,800 (16,250) Labour rate variance (4,200) (3,750) Labour usage variance 6,000 (12,500)