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Determine the direct labour rate variance for the month

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Question - Quality Oy produces a standard size metal railing unit. Its budget for April 20X6 is as follows:

Sales: 3,000 units x 250€ = 750,000 €

Direct materials: 3,000 x (8kg x 7€) = 168,000€

Direct labour: 3,000 x (2.5 hours x 6€) = 45,000€

Production overhead = 155,000€

Other overheads = 125,000€

Net profit = 257,000 €

Quality Oy does not absorb production overheads using an overhead absorption rate. It may be assumed that all of its overheads are fixed in nature. The company's actual results for the month are as follows:

Sales: 2,950 x 255€ = 752,250 €

Direct materials: 2,950 x (7.2kg x 7.50€) = 159,300 €

Direct labour: 2,950 x (2.4hours x 6€) = 42,480€

Production overhead = 162,000€

Other overheads = 130,000€

Net profit = 258,470€

Required - Determine the direct labour rate variance for the month?

Reference no: EM133108279

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