Advanced idle time variance. — OpenTuition Forums

IIbrahim5y ago

Dear John, How are you? I hope you are doing well, I would like to ask you about point#d in example 5 which is related to calculate idle time and efficiency variance actually sir I have seen your nice lecture but still have confusion about using $6 as standard direct labour rate in calculating those previous two Variances instead of $5.70 per hour. Take into consider that you have calculated rate of pay variance using $5.70 per standard direct labour hour. My question in brief, Why did you use $5.70 in calculation of rate of pay Variances and didn't for both of idle time and efficiency variance? Thank you in advance.

John MoffatTutor5y ago#1

The rate of pay variance is checking whether or not the correct rate per hour is being paid. The standard pay rate is $5.70 and we check whether we actually paid more or less than that amount. The standard cost per working hour is $6.00, and so when checking whether or not we worked the correct number of hours (whether because of a change in efficiency or a change in the idle time) we cost out at the standard cost per hour worked.

IIbrahim5y ago#2

Thank you John.

John MoffatTutor5y ago#3

You are welcome :-)

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