Hi, I do not understand the solution at all sir.
To calculate efficiency variance, I know that it is Actual hours * standard rate and you compare the answer to Standard hours * Standard Rate.
I think I do not know how to work out standard rate for labour.
Please could you explain.
The question is:
Company has budgeted labour cost of $180,000 for the production of 30,000 units per month. Each unit is budgeted to take 3 hours of labour. Actual cost is $160,000 for 28,000 and 85,000 hours were worked.
What is the labour efficiency variance?
Could you please explain how to get the standard rate because I still do not understand from the solution provided?
Many thanks
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Labour efficiency variance mock exam question
8y ago#1They budgeted on working 30,000 units x 3 hours per unit = 90,000 hours.
The budgeted labour cost is $180,000.
Therefore the standard rate per hour = $180,000 / 90,000 = $2 per hour.
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