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I am struggling on that question in Kaplan Exam Kit(Ques.236). Please guide me.
10,800 hours actually worked and paid costing $8,770.
If the rate variance is $706 adverse, the efficiency variance $256 favourable, and 5,000 units were produced, what is the standard production time per unit?Thank you
Since the rate variance is 706 adverse, then they should have paid (at standard cost) a total of 8,770 – 706 = 8,064 for the hours actually worked.
That means that the standard rate per hour is 8,064 / 10,800 = $0.746666 per hour
Since the efficiency variance is 256 favourable, they must have worked 256 / 0.746666 = 342.86 hours less than they should have worked.
They actually worked for 10,800 hours, so the standard hours for the actual production must have been 10,800 + 342.86 = 11,142.86 hours.
This is for 5,000 units, so the standard time per unit = 11,142.86 / 5,000 = 2.23 hoursI am a bit worried because usually in exam question the answer come to more exact figures. Check that you have copied the question correctly (although even if you have mistyped a figure, the workings above should make sense).
Thank you sir for your response.
In fact, i had really mistyped a figure. It was 10,080 hours instead of 10,800 hours.
The correct answer will then be 2.08.Thank you sir for your guidance.
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