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Hi
Could you please help me with this question, I need to work out the labour rate and labour efficiency variances. Please see question below,
Total labour variance $6,050 A
Each plasma TV uses 2 standard hours of labour and each LCD TV uses 1·5 standard hours of labour. The standard cost for labour is $14 per hour and this also reflects the actual cost per labour hour for the company’s permanent staff in November. However, because of the increase in sales and production volumes in November, the company also had to use additional temporary labour at the higher cost of $18 per hour. The total capacity of Carad’s permanent workforce is 2,200 hours production per month, assuming full efficiency. In the month of November, the permanent workforce were wholly efficient, taking exactly 2 hours to complete each plasma TV and exactly 1·5 hours to produce each LCD TV. The total labour variance therefore relates solely to the temporary
workers, who took twice as long as the permanent workers to complete their production.Thanks
Jefzen2610
The standard hours (for actual production) are calculated as follows:
Plasma: 750 x 2 hours; LCD 650 x 1.5 hours; Total standard hours = 2475Actual hours: The permanent workers were ‘perfect’ but they were limited to 2,200 hours. The extra hours were by temporary workers (so they should have been 275 hours) but they took twice as long as they should have done, so they took 275 x 2 = 550 hours.
So the total actual actual hours were 2200 + 550 = 2750 hours.The standard rate was $14 per hour.
The actual total labour cost was 2,200 x 14 (for the permanent workers) + 550 x 18 (for the temporary workers. So total labour cost = $40,700.
Now you should be ably to calculate the variances 🙂
Hi I’m struggling with this one too… I calculated the efficiency variance as $3850 A and we know that the total labour variance is $6050 A so the rate of pay must be $2,200 but I cannot get to that figure?
Actual hours at standard cost = 2750 x $14 = $38,500
Actual hours at actual cost = $40,700Rate of pay variance = 40,700 – 38,500 = $2,200.
Seems so obvious today! I must have had a mental block last night. Thank you so much for your reply. Much appreciated
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