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Growler Ltd is planning to make 100,000 units per period of product AA. Each unit of AA should require
2 hours to produce, with labour being paid £11 per hour. Attainable work hours are less than clock
hours, so 250,000 hours have been budgeted in the period.Actual data for the period was:
Units produced 120,000
Direct labour cost £3,200,000
Clock hours 280,000
FIND IDLE TIME VARIANCE & EFFICIENCY VARIANCE?SIR DON’T WE TAKE CLOCK HRS & STD. HRS TO CAL. EFFICIENCY RATIO
ALSO THEY TAKE 20% OF 280000 TO GET IDLE TIME
REALLY DON’T UNDERSTAND HOW TO CAL. IDLE TIME
MEANING OF ATTAINABLE HRS <CLOCK HRS.Please do not type in capital letters.
I have never seen the work ‘clock’ hours used in any exam questions!
However the question says that the work hours are less than the clock hours, and also says that they have budgeted 250,000 hours when the time to produce 100,000 units should only be 200,000 hours.
That must mean that the expect to work for 200,000 hours but that are going to have to pay for 250,000 hours. So the other 50,000 hours are expected to be idle. Out of 250,000 hours paid form they expect 50,000 idle hours, which is 50/250 = 20% of the hours paid for.
The efficiency variance is always calculated by comparing the actual working hours with the standard working hours for the actual production.
I explain all the idle time variances in my free lectures on advanced variance analysis. The lectures are a complete free course for Paper PM and cover everything needed to be able to pass the exam well.
thanks for clarification ,it really a mess when i was doing.
without your fm &pm lectures it would be mess to pass this exam.
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