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Hello Sir, I hope you’re doing good and are safe..
My question, In reference to question 5 of the attached link is that, do we not take account of Over-time rate while calculation labor variances? if we know the overtime rate exists haven’t we made allowances for it in the standard?
Please help me clear my confusion.
https://www.accaglobal.com/content/dam/ACCA_Global/Students/fun/f5/j16_hybrid_F5_q.pdf
We do not know whether or not any overtime was budgeted for (and it probably was not) and neither do we know how much overtime was actually worked.
All we know is that labour should have cost $42 for 3 hours (later obviously revised).
The fact that the operational labour rate variance is more than the revised standard rate is probably because they paid overtime, but this is only relevant for the discussion part of the question.
On the above question, how do they get revised standard 3.25 for the Labour Efficiency Planning variance
The original standard time was 3 hours. The question says that the extra time for the logo is 15 minutes. 15 minutes is 1/4 of an hour or 0.25 hours.
Hello,
I am really confused as to why for the labour planning and operational variances in the solutions they take the following formula:
labour rate planning variance:
(revised rate – std rate) x actual hours paidWhy is that? I thought that for planning – we replace the Actual figure with the revised figure, so basically it is not actual hours but instead revised hours???
Could you please help me out
Thank you!
Only one thing can change in a variance at a time.
So if you are calculatingSay labour rate planning variance:
You should be looking at the difference between standard and revised rateSay labour rate operational variance:
You should be looking at the difference between revised rate and actual paid.The hours would be the same for both
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