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Hello Tutor, for Question 1 in June 2008 (chaff co),why the labour rate calculation is based on (19.80 -18) not $20?
in the same time the labour efficiency and idle time are based on $20/hour paid?
What is the difference?
Thank you so muchIt is because idle time is budgeted for (at 10%).
The standard rate of pay is $18 (per the question) and this is therefore used for the rate of pay variance.
However, since 10% to time is budgeted as being idle, the standard cost per ‘working’ hour is 100/90 x $18 = $20 per hour, and this is used for the efficiency and excess idle time variances.
I explain all this in my free lectures on advanced idle time variances, and you can’t expect me to type out all my lectures here 🙂
The lectures are a complete free course for Paper F5 and cover everything needed to be able to pass the exam well.
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