Hi there,

These are the questions I am struggling with. I think I know the answers. This is to confirm.

I think labour hours when used in variable manufacturing costs can be misleading, as the efficiency rates are really Direct Labour efficiency rates which have an effect on Variable Manufacturing if this is the chosen cost driver.

Here are the questions. I need help with both:

When analyzing the total variable overhead cost variance into both spending and efficiency variances, it is often assumed that direct labour hours is the sole cost driver.

Required:

1.Explain if direct labour costs could ever be a better cost driver of variable overhead costs than direct labour hours.

2.How is the standard variable overhead rate different from the standard labour rate in variance analysis? Please explain.