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Hello sir, please help with the following problem:
a company produces units that should take 105 hrs to make. the standard rate of pay is $15/hr.
Idle time is expected to be 10% of hours paid.
They actually produce 20000 units . they pay $520,000 for 38,000 hours of which 3000 hrs are idle.
What is the labour efficiency variance?
– $75,000(adverse)
– $ 83,333(adverse)
– $120,000(adverse)
– $80,000(adverse)AND also sir please suggest if any attending all the lectures n reading from notes provided do we need to study the study material also ? or after attending the lectures only doing the revision kit will do? Please help with this also.
Please do not simply type out test questions and expect me to answer it for you. You must have an answer in the same book in which you found the question, so you should ask about whatever it is in the answer that you are not clear about and then I will explain.
I think that you have copied the question wrongly. Are you sure that the standard time isn’y 1.5 hours (not 105 hours) because otherwise the question is ridiculous!
Since the rate of pay is $15 and the standard idle time is 10%, they are paying for 100 hours in order to get 90 hours of work. So the standard cost of working hours is 15 x 100/90 = $16.6666 per hour.
The actual time worked is 35,000 hours and the standard time for 20,000 units is 20,000 x 1.5 = 30,000 hours.
So the efficiency variance is (35,000 – 30,000) x $16.666 = $83,333 adverse.
All of this is explained in detail in my free lectures.
My free lectures cover everything needed to be able to pass the exam well. The only extra book you need is a Revision Kit from one of the ACCA approved publishers (BPP or Kaplan), because practice is so important.
thank you so much sir and i am sorry i typed the question wrong. thankyou for the explanation.
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