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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:
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.
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