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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.
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.
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