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Please I have a multiple choice question.
Yplc produces widgets.
Each widgets should take 0.5hrs to make. The standard rate of pay is $10 per hr. Idle time is expected to be 5% of the hours paid.They actually produce 10800 units. they pay $50,000 for 6000hrs, of which 330hrs are idle. What is the labour efficiency variance?
.$2712(favourable)
.$2842(favourable)
$2842(adverse) answer
.$2712(adverse)here is my workings though I fail to arrive at the answer
10800units should have worked (*0.5hrs)= 5400hrs
but did work (6000hrs- 300hrs) = 5700hrs
difference =300hrs *$10= $3000You have made two mistakes.
One is that the actual hours worked are 6000 – 330 = 5670 (not 5700).
Secondly, when you costed out the hours you were wrong to use the rate of pay of $10 per hour. Since they were budgeted on 5% idle time, the rate per working hour is 10/0.95 = $10.53 per hour.
(It will help you to watch the lecture on advanced idle time variances)
thank you a lot Sir for showing me my mistakes. I have taken note and must avoid it in the exam.
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