Using the same labour data (standard 2 hours per unit at £9, 2,000 units made, 4,200 hours paid of which 150 were idle), what is the labour efficiency variance?
Answer and explanation
Correct answer: D. £450 adverse
- Step 1: Standard hours for 2,000 units = 4,000 hours.
- Step 2: Hours worked = 4,200 paid − 150 idle = 4,050 hours.
- Step 3: Efficiency variance = (4,000 − 4,050) × £9 = £450 adverse.
Answer
£450 adverse.
Why not the others: £450 favourable: More hours were worked than the standard for the output, so it is adverse. £1,800 adverse: This compares hours paid (4,200) with standard hours (4,000) and ignores that idle hours are treated separately: 200 hours × £9. £1,350 adverse: This is the idle time variance, not the efficiency variance.
Practise more Standard costing and variance analysis.
Free questions with an explanation for every one, and full timed ACCA Applied Knowledge (BT, MA, FA) mock tests.
More Standard costing and variance analysis questions
- A standard cost card shows 3 kg of material per unit at £4 per kg. In the period 2,000 units were made, using 6,300 kg of material that cost…
- Using the same data (standard 3 kg per unit at £4 per kg, 2,000 units made, 6,300 kg used costing £26,460), what is the material usage varia…
- A company bought 7,000 kg of material for £29,400 and used 6,300 kg in production. The standard price is £4 per kg. The company calculates t…
- The standard labour rate is £9 per hour with 2 hours per unit. In the period 2,000 units were made. 4,200 hours were paid for at a total cos…
- Using the same data, what is the idle time variance?
- Variable production overhead is absorbed at £3 per labour hour (2 hours per unit gives a standard of £6 per unit). In the period 2,000 units…