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Labour efficiency variance

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Labour efficiency variance

  • This topic has 3 replies, 2 voices, and was last updated 10 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • March 14, 2015 at 7:33 pm #232411
    Zuzie
    Participant
    • Topics: 20
    • Replies: 23
    • ☆

    Good Day Sir

    Please help with the following:

    A company uses standard marginal costing. For April budgeted sales & production were 2000 units, actual ales & production were 2,200 units

    Std selling price was $20 per unit, standard variable production cost was $14 per unit.

    Actual selling price was $23 per unit, standard variable production cost was $15 per unit.

    What was the favourable sales price variance?

    My workings:

    Actual: 2200×23=50,600
    Std: 2200×20=44,000
    Favourable price variance=6,600

    But why don’t we take into account the production costs?

    So would the efficiency variance then be:

    Actual: 2,200x(23-15)=17,600
    Std: 2,000(23-15)=16,000
    =1600 favourable

    OR
    also as 200 @ $8=1,600 F?

    Thanks
    Zuzie

    March 15, 2015 at 8:54 am #232444
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54659
    • ☆☆☆☆☆

    Production cost and efficiency variance are completely irrelevant because the question is asking for the sales price variance. All the sales price variance is looking at is whether the goods were sold at the budgeted selling price or not.

    I do suggest that you watch the free lectures on variance analysis.

    March 15, 2015 at 2:10 pm #232472
    Zuzie
    Participant
    • Topics: 20
    • Replies: 23
    • ☆

    yes will do

    thank u

    March 15, 2015 at 3:45 pm #232482
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54659
    • ☆☆☆☆☆

    You are welcome 🙂

  • Author
    Posts
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