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A direct labour time variance of $1,000 unfavourable sits alongside a rate variance of $2,550 favourable. What is the total direct labour cost variance?
A$3,550 favourable
B$1,550 unfavourable
C$1,550 favourable
D$3,550 unfavourable
Answer & Solution
Correct answer: C. $1,550 favourable
1. The total cost variance is the time variance plus the rate variance.
2. The unfavourable $1,000 is positive and the favourable $2,550 is negative.
3. $1,000 minus $2,550 gives negative $1,550.
4. The larger favourable rate element wins, so the net figure is $1,550 favourable.
5. It matches the direct comparison of actual cost of $48,450 against standard cost of $50,000.
_Source: Jonick, Principles of Managerial Accounting (UNG Press, CC BY-SA 4.0), section 8.3 Direct Labor Cost Variance_
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