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labour rate variance question

Home › Forums › Ask CIMA Tutor Forums › Ask CIMA P1 Tutor Forums › labour rate variance question

This topic contains 1 reply, has 2 voices, and was last updated by  Cath 4 months ago.

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  • Author
    Posts
  • October 5, 2018 at 3:46 pm

    enry
    Participant

    Hi I am a little bit confused and cannot work out the answer to this question..

    Labour efficiency rate adverse $1800

    Budget labour h. 2150

    number of hours per units 4h

    cost per unit 12$

    How many units were actually produced?

    I have made my calculation and the answer should be 575!

    1800:12:4= 37.5 units

    2150:4= 537.5 units

    TOT UNITS PRODUCED: 575..

    Is it correct? I am feeling totally confused at the moment..too many information to remember.

    Thanks for any explanation

    October 22, 2018 at 11:23 pm

    Cath
    Moderator

    Hi there!
    Dont despair – yes I agree with you the answer is 575.
    Its a badly worded question : the ‘budgeted labour hours’ should really be referred to as ‘Standard labour hours for actual production’.
    Also the 4 hours per unit should state this is actual hours pu and not standard

    In order to calculate this (see below).. you find the bottom line first because all numbers are known here — then add on the 1800 adverse variance to find the total for the top line, You know this total is sum of actual hours x actual rate.
    Through elimination you can find units via… $27600 divided by 12 then divided by 4 = 575 units.
    Therefore

    AH AR
    4hs x ? * $12 = 27600
    1800Adv
    SH AR
    2150hrs * $12 = 25800

    Answer ‘?’ is 575 units

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    Posts
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