CMA Intermediate · Cost Accounting · Standard Costing and Variance Analysis
At Nashik Components, 4,000 hours were paid for, but 3,600 hours were actually worked, the rest being idle due to a power failure. Standard rate is ₹50 per hour and the actual rate is ₹52 per hour. Standard hours for actual output are 3,500. What is the idle time variance?
The idle time variance is ₹20,000 Adverse. Of the 4,000 hours paid, 400 were idle because of the power failure, and idle time is valued at the standard rate of ₹50 per hour, always producing an adverse variance.
- A₹20,000 AdverseCorrect
- B₹20,000 Favourable
- C₹5,000 Adverse
- D₹20,800 Adverse
Explanation
Idle hours = 4,000 - 3,600 = 400. Idle time variance = idle hours x standard rate = 400 x 50 = ₹20,000 Adverse. Using the actual rate of ₹52 would give ₹20,800, which is wrong as the variance is valued at standard rate.
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