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Y plc produces widgets.
Each widget should take 0.5 hours to make. The standard rate of pay is $10 per hour. Idle time is expected to be 50% of hours paid.
They actually produce 10,800 units. They pay $50,000 for 6,000 hours, of which 330 hours are idle.
What is the labour efficiency variance?
Are you just asking me a question or is part of it causing you a problem? (because you write it as though you are just setting me a question and telling me to answer it, rather than asking for help!!!! We are here to try and give help!)
Also, you have copied the question wrong – the idle time is 5% of the hours paid (not 50%)!!!
The actual time spent working was 6000 – 330 = 5670 hours.
The time they should have spent working (the standard time) is 10,800 x 0.5 = 5400 hours.
So….the efficiency variance is (5670 – 5400) x (10×100/95) = 2842 (adverse)
((10 x 100/95) is the ‘work’ rate )
If that is not clear, then do watch my free lecture on this (advanced variances).
Sincerely sorry sir,
This question was causing me a problem. I was calculating (5670-5400) x $10 , because of which i arrived at a wrong answer.Now I am quite clear. Thank you very much sir.
Hi sir
I read somewhere that for labor efficiency is with hours actually paid. I thought it will be5400/95% = 5684 hours.
(6000-5684)10 = 3158 adverse.
productivity efficiency with worked hours as
(5670-5400) x 100/95 x 10
Im really confused now
I don’t know where you read it, but the labour efficiency variance compares actual hours worked with the standard hours for the actual production.
There is no such thing as a ‘productivity efficiency variance’.
The answer above is correct (and the free lecture on idle time variances should help you).
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