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ashrugs1says

Sir, the total budgeted idle hours for actual production will be 0.4 for every 7.6 hours. the budgeted total working hours is 7600, which means budgeted idle hours is 400. total variance is 4420 as you said. rate of pay is also ok, which is 3280(A)

below is what i think the idle and efficiency will variance will be. actual idle time taken =(8200-7740) 460 hours budgeted idle time actual = 400 hours difference= (460-400)=60*5.7=342(A) i think we should be comparing budgeted hours for actual production with actual results, right? and i chose 5.7 because that’s the rate per hour. why would we take $6.0 which is the rate per hours worked? and in my case the efficiency variance is 798 (A), i got that by ((7740-7600)*5.7. We have calculated the idle time variance additionally, so why choose 6 again? and the result is still tallying. 786+342+3240 gives 4420.

You are making two mistakes. For the idle time variance we compare the actual idle time (460 hours) with the standard (not the budget) idle time, which is 5% of the actual hours paid and so is 410 hours. So the difference is 50 hours.

For the efficiency variance, you are correct that we compare the actual hours worked (8,200 – 460 = 7,740) with the standard hours for the actual production 7,600.

Your other mistake is that both the idle time and the efficiency variances are looking at differences in working hours. Although the standard pay rate is $5.70 per hour, the standard cost for every hour actually worked is $6 as I explain in the lecture.

Work through the printed answer at the back of the lecture notes and it should then make sense.

Would it not make more sense for the cost card to be 8 hrs at $5.70 rather than 6.7hrs at $6?

In that case ashrugs1 calculations would fit well as 0.4 of the 8 hrs are idle, giving 4000 budgeted idle hrs with an actual adverse variance of 60 hours actually paid at $5.70. The real overspend due to adverse idle time would be $342. The same will be for efficiency the actual 140 adverse hours worked actually paid at $5.70 would arise to an overspend of $798. The totals do agree too at 798+342+3280=4420

Just seeking some clarification if you don’t mind.

Are you saying that the $5.70 is used only in the rate of pay variance because that is what is physically paid to the employee but for all other variances the rate of $6 is used?

Thank you very much. Indeed it makes sense to budget for idle time since it is obvious that it will exist in a process. The variance is the difference between the actual and budgeted idle time.

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ashrugs1 says

Sir,

the total budgeted idle hours for actual production will be 0.4 for every 7.6 hours. the budgeted total working hours is 7600, which means budgeted idle hours is 400.

total variance is 4420 as you said.

rate of pay is also ok, which is 3280(A)

below is what i think the idle and efficiency will variance will be.

actual idle time taken =(8200-7740) 460 hours

budgeted idle time actual = 400 hours

difference= (460-400)=60*5.7=342(A)

i think we should be comparing budgeted hours for actual production with actual results, right? and i chose 5.7 because that’s the rate per hour. why would we take $6.0 which is the rate per hours worked?

and in my case the efficiency variance is 798 (A), i got that by ((7740-7600)*5.7.

We have calculated the idle time variance additionally, so why choose 6 again?

and the result is still tallying. 786+342+3240 gives 4420.

could you please tell me why I’m wrong, sir?

I’m really sorry for my bad English.

Thank you.

John Moffat says

Your English is fine 馃檪

You are making two mistakes. For the idle time variance we compare the actual idle time (460 hours) with the standard (not the budget) idle time, which is 5% of the actual hours paid and so is 410 hours. So the difference is 50 hours.

For the efficiency variance, you are correct that we compare the actual hours worked (8,200 – 460 = 7,740) with the standard hours for the actual production 7,600.

Your other mistake is that both the idle time and the efficiency variances are looking at differences in working hours. Although the standard pay rate is $5.70 per hour, the standard cost for every hour actually worked is $6 as I explain in the lecture.

Work through the printed answer at the back of the lecture notes and it should then make sense.

ashrugs1 says

Thank You, John. G’day.

John Moffat says

You are welcome 馃檪

goldybird says

Hi

Would it not make more sense for the cost card to be 8 hrs at $5.70 rather than 6.7hrs at $6?

In that case ashrugs1 calculations would fit well as 0.4 of the 8 hrs are idle, giving 4000 budgeted idle hrs with an actual adverse variance of 60 hours actually paid at $5.70. The real overspend due to adverse idle time would be $342.

The same will be for efficiency the actual 140 adverse hours worked actually paid at $5.70 would arise to an overspend of $798.

The totals do agree too at 798+342+3280=4420

jonathanline47 says

G’day John,

Just seeking some clarification if you don’t mind.

Are you saying that the $5.70 is used only in the rate of pay variance because that is what is physically paid to the employee but for all other variances the rate of $6 is used?

Thanks in advance

John Moffat says

Yes. The rate of pay variance is concerned with the actual amount paid per hour. The other variances are concerned with the cost per hour of work.

cawale06 says

Thank you very much.

John Moffat says

Thank you for your comment 馃檪

alie2018 says

Thank you very much. Indeed it makes sense to budget for idle time since it is obvious that it will exist in a process. The variance is the difference between the actual and budgeted idle time.