Standard Costing

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 hours I 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.

You are welcome :-)