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sir,
please correct me if I’m wrong.
Y plc produces widgets.
Each widget should take hours to make . the standard rate of pay is $ 10 per hour. Idle time is expected to be 5% of hours paid.
They actually produce 10,800 units. They pay $50,000 for 6000 hours , of which hours are idle.
What is the labour efficiency variance?
Standard rate pay = 10 + (10 x .05) = $ 10.50
Efficiency variance
Actual hours worked (6000 – 330) = 5670
Std hours for Actual prod (10800x.5) = 5400 std cost
= 270 x $10.5 = $ 2835Sorry, but you are wrong.
The standard rate of pay for hours worked is 10/0.95 = $10.53 per hour.
So the variance is 270 x $10.53 = $2843.
Thank you sir,
sir, why do we divide $10/.95. I clear. Its not clear. please help
Have you watched the free lecture???
You cannot expect me to type out the lecture here!!!For every 1 hour we pay, we only get 0.95 hours of work.
So 0.95 hours of work costs $10.Therefore 1 hour of work costs 10/0.95.
I’m really sorry if I ask a wrong question from you, I watch all the lectures both F2 & F5.Yet I watch the Variance Analysis again to make it more clear. Since they have given the Std Idle time as % I thought I should multiply by % the std price. sorry again 🙁
Thank you very much for the clear answer….
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