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Hello,
can you please explain calculation for oper.labour eff. var?
I don’t understand where did they get 7800 l in answer.
Also, is there any other way for calculation in this example (because there is no revised time given)?Thank you in advance,
The fact that there is no revised time given means that the original standard time remains unchanged at 8 hours per 100 litres, and therefore there is no planning variance – the whole variance is operational. (Which is why the question did not ask for the planing variance, which is $0.)
7,800 litres is the actual level of production, and as always when calculating the efficiency variance we compare the actual time taken (640 hours) with the standard time for the actual production (7,800 x 8/100) and cost out at the standard cost per hour ($24).
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