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Sir, I gave the PM Mock Which was available here & scored 83%.
I have One question,
Question Number 18I got the Answer 5.66, but in the solution its 5.76.
I did : 316800/42000
= 7.54.8/60×45
= 5.66 (Ans)Could you plz explain how??
The questions appear in random order from a large bank of questions, so what you see as question 18 is not question 18 for me 🙂
Please type the first line of the question so that then I will be able to know which one and be able to answer you .
Sir I understood that one, it’s done by high low method. I had another question.
A company produces units that should take 1.5 hours to make. The standard rate of pay is
$15 per hour. Idle time is expected to be 10% of hours paid.
They actually produce 20,000 units. They pay $520,000 for 38,000 hours, of which 3,000
hours are idle.
What is the labour efficiency variance (to the nearest $)?$75,000 (adverse)
$80,000 (adverse)
$83,333 (adverse)
$120,000 (adverse)Why is the answer $83333?
10% of hours paid are idle, and the standard pay rate is $15 per hour. Therefore the standard cost per hour worked is 100/90 x $15 = $16.6667
The actual hours worked were 35,000. The standard hours worked for 20,000 units is 30,000 hours.
Therefore the efficiency variance is 5,000 hours x 16.6667 per hour = $83,333 (adverse)
This is all explained in my free lectures on Advanced Idle Time variances. The lectures are a complete free course for Paper PM and cover everything needed to be able to pass the exam well.
Sir I get everything,
My question is why are we including Idle time for $15 which becomes &16.667 (90% + 10%) and removing Idle hours from 38000 which becomes 35000? This is where I’m confused !
Is it a rule that $ rate should be adjusted for Idle time & Idle Hours should not be counted but only actual hours worked should be taken??
For the efficiency variance we only ever compare the actual hours worked with the standard hours for the actual production.
Again, have you watched my free lectures on this?
Got it sir !! So it’s the basic labour efficiency variance which is adjusted with extra 10% $ rate !!
Thank you !
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