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A business makes another product. The learning effect stopped after the 16th batch of product, and a steady state was reached. Workers in the business received 15 per hour. The first batch took 0.75 hours to produce. The 16th batch took 0.5 hours and the standard cost was revised to this figure once the steady state was reached. The business produced 10000 batches during the year.
What is the favourable labour efficiency planning variance?In the above question, I thought that 0.5 hours should be taken as the budgeted figure instead of being considered as revised figure because this is where the steady rate has been reached, and the figure of 0..75 hours should neither be considered as the budgeted nor the revised figure because it is the time for the first batch, and therefore irrelevant whereas the time for the 16th batch should be taken as the budgeted figure. So is it correct?
Why are you attempting a question for which you do not have an answer? You should be using a Revision Kit from one of the ACCA Approved Publishers – they have answers and so you would know whether or not you are correct (and could then ask about anything in the answer about whatever you were not clear about).
From what you have typed it would appear that they originally budgeted on there being a learning rate to apply to all 10,000 batches (and you can calculate the learning rate they applied because you know how long the 16th batch took).
In fact the learning rate stopped after 16 batches and the standard time changed to 0.5 hours.
So the planning variance is the difference between the original budgeted cost for the batches above 16 and the revised cost per batch for the batches above 16.
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