Standard time 4,000 hours at ₹20 per hour. Actual 4,200 hours at ₹22. Labour cost variance equals:
A₹12,400 adverse
B₹4,000 adverse
C₹8,400 adverse
D₹4,000 favourable
Answer & Solution
Correct answer: A. ₹12,400 adverse
1. Standard cost = 4,000 × 20 = ₹80,000.
2. Actual cost = 4,200 × 22 = ₹92,400.
3. Labour cost variance = Standard − Actual = 80,000 − 92,400 = −12,400.
4. The negative figure shows an adverse variance of ₹12,400.
_Source: ICAI BoS Inter Paper 3, Ch 13 "Standard Costing", §13.5.2 Illus 7_
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