If there is some idle time given that is expected, why do we take a standard grossed rate for labour efficiency rate? It says in my kaplan that for every 1 productive hour worked there will be a 5% non productive hour paid, what does that mean??
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Standard Gross Rate in Labour Efficiency Variance
in some production companies it is quite normal to have idle time for labours. it can be of any reason like machine maintenance, breakdown, etc. this idle time time is paid.
in the context, above, if an employ was paid for 1 hour , then 0.05 hr was for idle time. usually wage were given in month end, say, you are paid for 200 hours and 10 hrs were idle that is, only 190 hrs were productive hours. using this information, they make standard. it may vary in actual production time.
standard grossed up rate is used for calculating labour proiductive effiency. say, only productive hrs were 190 hrs. to do that work they took 200 hrs, because 10 hrs were idle. by taking std grossed up rate we are finding payment for 200 hrs.
that means, though productive hrs were 190, we would take amount for 200 hrs.
expected hrs were 190 and actual were 192 hrs. then the productive variance is 2*5*100/95=10.52 adv. if 5 were labour rate.
see, 190*5*100/95 =1000
it is same as, 200*5=1000
in effect, you could say, even though pay is $5 per hour, the effective payment is 5*100/95 per productive hour. we cannot take $5 per hour for both productive and idle time variance. in this case, we take labour rate as 5*100/95 instead.
in the context, above, if an employ was paid for 1 hour , then 0.05 hr was for idle time. usually wage were given in month end, say, you are paid for 200 hours and 10 hrs were idle that is, only 190 hrs were productive hours. using this information, they make standard. it may vary in actual production time.
standard grossed up rate is used for calculating labour proiductive effiency. say, only productive hrs were 190 hrs. to do that work they took 200 hrs, because 10 hrs were idle. by taking std grossed up rate we are finding payment for 200 hrs.
that means, though productive hrs were 190, we would take amount for 200 hrs.
expected hrs were 190 and actual were 192 hrs. then the productive variance is 2*5*100/95=10.52 adv. if 5 were labour rate.
see, 190*5*100/95 =1000
it is same as, 200*5=1000
in effect, you could say, even though pay is $5 per hour, the effective payment is 5*100/95 per productive hour. we cannot take $5 per hour for both productive and idle time variance. in this case, we take labour rate as 5*100/95 instead.
14y ago#2Vipin is correct :)
Hi, when do we know we should apply standard gross up rate? Because some questions just use the normal standard rate.
Thank you
8y ago#4It depends on whether or not there is idle time, and how the information is given in the question!
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