Key Topics:
• Standard costing and variance analysis
• Efficiency and rate variances
• Operating statement reconciliation.

Concepts Covered:
• Calculating direct labour efficiency variance
• Reconciliation of budgeted and actual contribution through a standard cost operating statement
• Analyzing the interrelationship between direct labour rate and efficiency variances

Description: The case required evaluating variances in a standard costing system for Castilda Co, a toy robot manufacturer. Tasks involved: Selecting the correct formula to calculate the direct labour efficiency variance. Completing the standard cost operating statement to reconcile the budgeted contribution with actual contribution, incorporating sales price and cost variances. Identifying potential explanations for the interrelationship between direct labour rate and efficiency variances, such as differences in labour grade, bonuses, or production levels.