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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!
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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