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how are we supposed to decide if we should add or substract a particular given variance in a question?
Qst- 10080 hours actually worked and paid costing $8770
if the rate variance is $706 adverse and the efficiency variance is $256 favourable, and 5000 units were produced, what is the standard production time per unit?how to analyse if we should add/substract the rate/effiency variance?
In future you must ask in the Ask the Tutor Forum if you want me to answer. This forum is for students to help each other.
A variance is favourable if it will result in more profit so therefore less cost, or unfavourable if it will result in less profit so therefore more cost.
Since the rate variance is adverse it means the actual cost is more than it should have been. Since the efficiency variance if favourable it means that the actual cost is less than it should have been.
Have you watched my free lectures on variances? The lectures are a complete free course for Paper MA and cover everything needed to be able to pass the exam well.
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