Red River Corporation Reports the Following Standards for Direct Labour

question 221

Essay

Red River Corporation reports the following standards for direct labour for the year:
Standard cost per hour $18.50
Standard quantity per finished good 2.5 hours
During the year, 180,000 finished goods were produced. The direct labour efficiency variance was $38,850 favourable. The direct labour flexible budget variance was $700 favourable.
Calculate the following items regarding direct labour for Red River Corporation for the year:
1. Direct labour price variance
2. Standard quantity of direct labour for actual production
3. Actual hours of direct labour incurred for actual production

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Definitions:

Opportunity Costs

The loss incurred by not opting for the alternative that stands as the next best choice during decision-making.

Specialization

The process of focusing resources on a limited range of goods or services to gain efficiency or quality advantages.

Comparative Advantage

The capability of an entity to generate a specific product or offer a service with lesser marginal and opportunity costs compared to others.

Trade Benefits

Trade benefits refer to the advantages a country gains from engaging in international trade, such as increased economic growth, diversity of goods, and improved efficiency.