Comments

  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
    50020
    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

        QUESTION

        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

        required:
        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.

  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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