• Profile photo of John Moffat says

      Have you downloaded the free Course Notes? (If not then it is pointless watching the lectures – it says above every lecture that it is based on the Course Notes and gives a link to download them)

      If you have downloaded them then you will see in the question “Hours worked: 7740 hours”.

  1. avatar says

    hi very good lecture

    but am just a little confused i know this formula for labour variances:

    actual hour *actual rate = a
    rate variance = b-a= 46440-50020 =3580(A)
    actual hour * standard rate = b
    7740 * 6 =46440
    efficiency variance = c-b= 45600-46440=840(A)
    standard hour *std rate = c
    7600 * 6 =45600

    can you check my error and tell me plz?

    when i put actual hour=8200 my effeciency variance change plz tell me as soon as possible what is my error?

    thnx for the lecture

      • avatar says


        A company budgets that each unit will take 7.6 hours to make.

        It budgets on paying workers at the rate of $5.70 per hour,and that 5% of the hours paid for will be idle.

        The actual results(for production of 1000 units)are:

        Hours paid : 8200 hours at a cost of $50020

        Hours worked: 7740 hours

        the total variance into rate of pay , idle time ,and efficiency variances

      • Profile photo of John Moffat says

        The rate variance is (8200 x 5.70) – 500020 = 3280 (A)

        The efficiency variance is (7740 – (1000 x 7.6)) x 6 = 840 (A)

        The excess idle time variance is ((8200 – 7740) – (5% x 8200)) x 6 = 300 (A)

      • avatar says

        is the formula i used correct or i made an error because i always use this formula and get the right answer but for this one i don’t get it right why?

  2. avatar says

    Dear John,

    I really appreciate your effort with this, Your lecture is very brief and to the point. This has actually given me some knowledge.

    Would you be able to upload a lecture where you would be doing a full exam paper please? A latest one?

    Even we know the scenario and how to do a particular question, I’m finding it difficult to attempt exam questions.

    Your support is highly appreciable.

    Thanks & regards.

    • Profile photo of John Moffat says

      The pay rate is the actual rate that they pay per hour.

      The work rate is the effective cost per working hour.

      work rate = pay rate x std hour paid per unit / std hours worked per unit.

      You use the pay rate when calculating the rate of pay variance

      You use the work rate when calculating the efficiency variance and the excess idle time variance.

      • avatar says

        Hi John,

        Sorry to ‘labour’ the point (no pun intended!) but I’m not clear why the work rate was not required in Chapter 13 Example 1 when we worked out the Idle Time variance and Efficiency variance but it was required for Example 5, chapter 14. will we know the difference in the exam?


      • Profile photo of John Moffat says

        The reason is that in the first example no idea time was budgeted for (and therefore all of the idle time was a variance and the ‘work rate’ was the same as the ‘pay rate’.

        In the second example, idle time was budgeted for and therefore we expected the working hours to cost more than the pay rate.

        In the exam, you just have to check whether or not idle time was budgeted for.

  3. Profile photo of Miss A.. says

    Dear Sir, in the above example we have used work rate while calculating labour idle time variance.But what to do if we are not given work of rate or we don’t have enough information in the question to calculate it.Would then we use pay rate while calculating labour idle time variance??

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