Diane Disney is the fabricating department manager of Walt D. Company.She has asked for your help in explaining her labour cost report for November.The report shows that she had a total labour variance of $2,200 unfavourable.Diane says "I expected a good labour cost report because we made improvement in several areas including reduced time for our process.We did produce less than expected because a large order was cancelled at the last moment, but I don't see how that caused my labour costs to be higher."

Disney has provided you with the following information about her labour costs.

Actual labour cost$135,200Budget labour cost133,000Total labour variance2,200U

At a first step, you decide to break the total labour variance into the rate and efficiency variances.The results of your analysis are shown below:

Labour rate variance$3,750ULabour efficiency variance1,550FTotal labour variance2,200U

Explain to the COO, who has been on job for 1 week, what your analysis shows about how well Disney has managed her labour costs.(3 marks)