(1) Regarding the planning and operational variance, i was taught using formula:
For instance, labor rate planning variance = (Standard rate – Revised standard rate) x Revised standard hour on actual output However, according to the answer, (Revised rate – std rate) x actual hours paid is used. Which formula is correct?
(2) When we say a process is 20% slower, do we mean it is only operates at 80% efficiency? If operates in 100% efficiency we need to take 0.5 hours to complete, in 80% efficiency we will need to take 0.5 x 100/80 = 0.625 hours to complete.
So when a process is 20% slower, time taken should have increased 25%.
Using 0.5 x 1.20 = 0.6 hours does not make sense to me. Can anyone please enlighten me with this?