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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 5%of hours paid.
They actually produce 10800 units. They pay $50000 for 6000 hours, of which 330 hours are idle time. What is the labour efficiency variance?I don’t know how to solve it although I tried and tried to do. Please help me, Sir?
You need to watch the lecture on advanced idle time variances!!
For the efficiency variance you compare the standard hours with the hours actually worked. The standard hours are 5400. However they worked 5670 hours (6,000 – 330)
So the efficiency variance is 5670 – 5400 = 270 x $10.526 = $2842 (adverse)
$10.526 is the rate per working hour, $10/0.95.
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