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“Y Plc produces widgets. Each widget should take 0.5 hours to make. The standard rate of pay is $10/hr. Idle time is expected to be 5% of hours paid.
They actually produced 10,800 units and paid $50,000 for 6,000 hours, 330 of which are idle.
What is the labour efficiency variance? ”The correct answer was $2842 (A). Could you show me how to reach this number please?
Thank you so much.
The standard cost for each hour worked is $10/0.95
The actual hours worked is 6,000 – 330 = 5,670 hours
The standard hours for 10,800 units is 10,800 x 0.5 = 5,400 hours.Therefore there is an adverse efficiency variance of 270 x 10/0.95 = $2,842
Have you watched my free lectures on this?
Thank you sir. Yes I have, but still a little confused with the idle time.
But i get it know, thank you so much
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