# revised price rate??

A ltd was setting its standards for the next year at a time when the current average pay rate in the organisation was \$7.00 per hour. at the time theappropriate regional wage rate index was standing at 140, and expect to rise to 145 in the next year, to take account of this expected increase in costs the new standard wage rate was set at \$7.25 per hour.
in reality at the start of the year all employees received a pay reward of 4.5%. the original wage index moved to 150.
during the week 12, labour force worked 3,200 hours, and were paid a total of \$23,744.
calculate labour rate variance and analyse it using the actual pay award data into the part of variance due to the pay award....
i am having prob with which figure to use for standard price rate and which figure to use for revised figure.
what i thought is if i am using \$7,25 as my standard rate price, then the revised price shoudl be 7.25+4.5%??

• It's a long time since I did my exams, but if you replace the words "in reality" with actual and ignore the wage rate index info which is not required, I read it as:

At the start of the year current pay was \$7 per hour and they actually received a 4.5% increase. so the ACTUAL pay is \$7 plus 4.5%.
It tells you the standard rate was set at \$7.25

Anybody else agree?

I always found that the trick was reading the question, understanding what it is asking and fitering out the information you don't need.
• Jan wrote: »
It's a long time since I did my exams, but if you replace the words "in reality" with actual and ignore the wage rate index info which is not required, I read it as:

At the start of the year current pay was \$7 per hour and they actually received a 4.5% increase. so the ACTUAL pay is \$7 plus 4.5%.
It tells you the standard rate was set at \$7.25

Anybody else agree?

I always found that the trick was reading the question, understanding what it is asking and fitering out the information you don't need.

• meibaker wrote: »
A ltd was setting its standards for the next year at a time when the current average pay rate in the organisation was \$7.00 per hour. at the time theappropriate regional wage rate index was standing at 140, and expect to rise to 145 in the next year, to take account of this expected increase in costs the new standard wage rate was set at \$7.25 per hour.

The above paragrapgh clearly states on how the standard will be set. The index numbers are to be used. the expected index is 145

therefore £7.00 / 140 x 145 = £7.25

The Standard Rate is set at £7.25
meibaker wrote: »
in reality at the start of the year all employees received a pay reward of 4.5%.

The agreed pay rise has been 4.5%

therefore £7.00 x 4.5% = 0.315

Agreed payrate is £7.00 + 0.31= £7.31 (already the rate varience will be 6p Adverse)
meibaker wrote: »
the original wage index moved to 150.

if the wages raise were paid unsing the index, then the wage rate will be

£7.00 / 140 x 150 = £7.50.

from this perspective the wage rate paid £7.31 is actually £0.19 Favourable
meibaker wrote: »
during the week 12, labour force worked 3,200 hours, and were paid a total of \$23,744.

The ACTUAL pay rate paid = \$34,744 divede by 3,200 hours = \$7.42

meibaker wrote: »
calculate labour rate variance and analyse it using the actual pay award data into the part of variance due to the pay award....

Actual pay award = \$7.42
due to pay award = \$7.31

I am not sure about this. wording for the required varience calculations are not clear to me