Variances — OpenTuition Forums

Ssharly11y ago

please I have a multiple choice question. Y plc produces widgets. Each widget should take 0.5 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 10800 units. They pay $50,000 for 6,000 hours, for which 330 hours are idle. What is the excess idle time variance? .$3,300 (adverse) .$3474 (adverse) .$316 (adverse) .$300 (adverse)

John MoffatTutor11y ago#1

Have you watched the free lecture on idle time variances? (The answer is C)

John MoffatTutor11y ago#2

They worked 6,000 hours. Therefore the expected idle time is 5% x 6,000 = 300 hours. So the excess idle time is 330 - 300 = 30 hours. The pay rate of $10 per hour. So the work rate is 10/0.95 = $10.526 So the variance is 30 x 10.526 = $316

Ssharly11y ago#3

Please I don't understand why the worked rate is 10/0.95=$10.526? I thought it is 10*0.95=$9.5

John MoffatTutor11y ago#4

Have you watched the free lecture on this? We pay $10 for every hour. However, since 5% of the time paid is idle, it means for every hour paid we only get 0.95 hours of work (but are still paying $10). So if 0.95 hours of work are costing $10, then 1 hour of work is costing 10/0.95 = $10.526.

Ssharly11y ago#5

Thank you Sir! very clear now.

John MoffatTutor11y ago#6

You are welcome :-)

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