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Dear Mr. John,
Please can you show us the answer of labour efficiency variance question.
Thanks & Regards
You will have to say which one – there are several (there is a large bank of questions, and the exam selects 20 from the bank at random – ever time you attempt it you are likely to get different questions).
As you will have read on the page before the test, you can review your answers at the end – so it will tell you which is the correct answer. For workings of any you get wrong you need to copy the question here.
Y PLC produce widgets. Each widget should take 0.5 hours to make. The standard rate is $10 per hour. Idle time is expected to be 5% of hour paid . Actually produce 10800 unites they paid $ 50000 for 6000 hour of which 330 hours are idle. What is the labour efficiency variance.
The actual hours worked are 6,000 – 330 = 5,670.
The standard hours for the actual production are 10800 x 0.5 = 5400
So they took 270 hours more than they should have done.
The standard cost for each working hour is $10/0.95 = $10.53
So the efficiency variance is 270 x $10.53 = $2843
(You will find the free lecture on excess idle time variances to be useful.)
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