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Hi master
I’ve seen a question in Opentuition mock exam which asks us to calculate the labour efficiency variance when we have some idle time. although I understood how to calculate the labour efficiency variance, I have a question about how to calculate the labour rate variance with the same condition ?! and I want to know whether we need more information about wage rate to solve the question or not?!the question was :
a company produce units that should take 1.5hour to make. The standard rate of pay is 15$ per hour. Idle time is expected to be 10% of hours paid. They actually produce 20,000units and they pay 520,000$ for 38,000hour of which 3,000 hours are idle.
I would appreciate if you could provide me with some examples to practice particularly variances with idle time or wastage of material.
Idle time does not affect the labour rate variance. We compare the actual hours paid at actual rate, with actual hours paid at standard rate.
This is all explained, with examples, in my free lectures – you cannot expect me to type them out here!!!
Thank you sir
so you mean we should multiply 15 as our standard rate and not 16.6?!
therefor labour rate variance:
(520,000 – (38,000 * 15) = 50,000Aand for sure I’m reading your lecture for my last revision :))
Bests
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