In preparing the flexed budget following were adopted

Direct material Direct labour Variable overheads

10 kg of materials per unit produced

2 hours per unit produced

Allocated on the basis of direct labour hours

The following additional information is available concerning the actual output:

1. The actual usage of materials in November was 54,200 kg: and
2. The wage rate increased to 6.60 per hour at the start of November.

Calculate the relevant cost variance.

using the formula:

labour rate variance

= actual number of hours paid for

x (standard rate per hour - actual rate per hour)

labour efficiency variance

= standard rate per hour

x (standard hours for actual output - actual number of hours worked)

= actual direct labour hours

x (standard variable overheads rate per hr - actual variable rate per hr)

= standard variable overhead rate per hr

x (standard hr for actual output - actual number of hr worked)

Original budget Flexed budget Actual Variance Number of 5000 5500 5500 units Direct material 20,000 22,000 22,764 764 A Direct labour 60,000 66,000 75,900 9,900 A Variable 14,000 15,400 14,950 450 F overheads Depreciation 4,000 4,000 4,000 0 Fixed 10,000 10,000 9,000 1,000 F production overheads Total 108,000 117,400 126,614 9214 A