Section A

PixelPlay, a video game studio, uses standard costing for its freelance coders.

Which of the following formulas correctly calculates the direct labor rate variance?

Answer options:

Standard hours for actual production × (Standard Rate - Actual Rate)

Actual hours paid × (Standard Rate - Actual Rate)

Standard Rate × (Standard hours - Actual hours)

Actual Rate × (Standard hours - Actual hours)

How to approach this question

Recall that a 'rate' or 'price' variance looks at the difference in money (Rate) multiplied by the actual quantity (Hours) purchased/paid.

Full Answer

B.Actual hours paid × (Standard Rate - Actual Rate)✓ Correct

The direct labor rate variance measures the difference between what was actually paid for the labor hours worked and what should have been paid according to the standard. The formula is: (Standard Rate - Actual Rate) × Actual Hours Paid. (Note: If Actual Rate > Standard Rate, the result is negative/Adverse).

Common mistakes

Confusing rate variance with efficiency variance (Option C).

Question 24 All questions Question 26

Practice the full ACCA MA — Management Accounting Practice Exam 6

38 questions · hints · full answers · grading

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