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The monthly budgeted labour hours of Naroco Resources based on budgeted production output of 10,000 units are expected to be 15,000 hours and the standard labour rate was set five years ago at RM8.50 per hour. During a recent month, the total direct labour hours of 15,360 were recorded and the labours were paid a total amount of RM138,640. The company produced 9,200 units of output during the month.
Advise the management of Naroco Resources Sdn Bhd regarding the total labour efficiency operating variance; given that the standard labour hours is expected to increase by 20% due to changes in production process. In addition, the management had raised the standard labour rate for all types of labours by RM1.40 per hour.
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