Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Variance
- This topic has 1 reply, 2 voices, and was last updated 2 years ago by John Moffat.
- AuthorPosts
- September 15, 2022 at 5:56 pm #666507
Glove Co makes high quality, hand-made gloves which it sells for an average of $180 per pair. The standard cost of labour for each pair is $42 and the standard labour time for each pair is three hours. In the last quarter, Glove Co had budgeted production of 12,000 pairs, although actual production was 12.600 pairs in order to meet demand. 37,000 hours were used to complete the work and there was no idle time. The total labour cost for the quarter was $531,930.
At the beginning of the last quarter, the design of the gloves was changed slightly. The new design required workers to sew the company’s logo on to the back of every glove made and the estimated time to do this was 15 minutes for each pair. However, no-one told the accountant responsible for updating standard costs that the standard time per pair of gloves needed to be changed. Similarly, although all workers were given a 2% pay rise at the beginning of the last quarter, the accountant was not told about this either. Consequently, the standard was not updated to reflect these changes.
When overtime is required, workers are paid 25% more than their usual hourly rate.In this question, we are not taking overtime in account for any variance calculation. Can you tell why?
September 16, 2022 at 8:32 am #666531Given that the question gives the total paid, this will already include any overtime payments and the calculations are therefore not affected.
It is only relevant in the discussion for part (c) of the question.
- AuthorPosts
- You must be logged in to reply to this topic.