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December 2012 Question – Truffle Co (Variance Analysis)

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › December 2012 Question – Truffle Co (Variance Analysis)

  • This topic has 1 reply, 2 voices, and was last updated 4 years ago by John Moffat.
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  • Author
    Posts
  • May 28, 2021 at 3:57 pm #622062
    simran98
    Participant
    • Topics: 23
    • Replies: 22
    • ☆

    Hello Sir

    Can you please explain why are we not accounting for the 20% slower process in for Revised Standard price? With 20% slower process each batch will now take 0.6 hours to be made. With 5% cut, the cost of labour will be $5.7, hence cost per unit should be 9.5.

    Thank you in advance!

    May 29, 2021 at 8:33 am #622123
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54700
    • ☆☆☆☆☆

    The question is asking for the labour rate and the labour efficiency variances and therefore we look at each one separately. The standard labour rate is $12 per hour and so the revised rate is $11.40 per hour. The standard time per batch was 0.5 hours and so the revised standard time is 0.6 hours.

    The revised standard cost per batch is therefore 0.6 x $11.40 = $6.84 per batch (not $9.50) but this is not relevant given we are looking at the rate and efficiency variances separately.

    I do suggest that you watch my free lectures on planning and operational variances.

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