Reference no: EM132806836

Cox Engineering performs cement core tests in its laboratory. The following standards have been set for each core test performed:

                             Standard Hours or Quantity         Standard Price or Rate

Direct materials                  3.0 pounds                          £0.75 per pound

Direct labour                  0.4 hours                                   £12.00 per hour

Variable manufacturing overhead  0.4 hours                      £9.00 per hour

During March, the laboratory performed 2,000 core tests. On March 1 no direct materials (sand) were on hand. Variable manufacturing overhead is assigned to core tests on the basis of direct labour hours. The following events occurred during March:

• 8,600 pounds of sand were purchased at a cost of £7,310.
• 7,200 pounds of sand were used for core tests.
• 840 actual direct labour hours were worked at a cost of £8,610.

Problem 1: Actual variable manufacturing overhead incurred was £3,200. The labour efficiency variance for March is:

Multiple Choice

Option 1: £480 favourable.
Option 2: £480 unfavourable.
Option 3: £192 favourable.
Option 4: £192 unfavourable.