- This topic has 5 replies, 3 voices, and was last updated 9 years ago by
.
- Posts
Hi there,
A little confused with this, please clarify if I have this right.
If we are given both Labour Worked and Labour Paid values:
The normal Labour Variance would be calculated on the Paid rate (if idle time was not asked).
Also would both Variable and Fixed Overhead Variances be calculated on the Worked Labour hour rates?
The labour rate of pay variance is always calculated using the standard rate of pay.
The layout efficiency and idle time variances are calculated using the standard rate per working hour.
(If there is no idle time, then the rate per working hour will be the same as the pay rate)Variable overheads and fixed overheads (if it is absorption costing) are both calculated on the hours worked (and the standard rate per hour will be given per working hour – there is no such thing as a pay rate when it comes to overheads).
Hi John,
I was attempting the MCQs quiz and I came across the following question:
Which of the following is not a likely cause of an adverse labour rate of pay variance?
A. Buying less expensive materials
B. Overtime having been worked
C. Buying more expensive materials
D. Using more skilled workersI knew B and D could not be the answer. Could you explain briefly why the the answer is C and not A.
Regards,
SleyimBuying less expensive material could be a cause of an adverse rate variance because it may take longer to deal with the material (because it is worse quality) and therefore mean having to pay overtime to the workers.
(Buying more expensive material would be the opposite and so not a likely cause of a rate variance)
- You must be logged in to reply to this topic.