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ACCA Applied Knowledge · Management Accounting · Variance calculations and analysis

Brindle Co has a standard labour rate of $9 per hour. In June, 3,200 hours were paid at an actual cost of $30,080, of which 150 hours were recorded as idle. Standard hours for actual production were 2,900. What is the labour efficiency variance for June?

The labour efficiency variance is $1,350 adverse. Hours actually worked were 3,050 after removing 150 idle hours, which is 150 more than the 2,900 standard hours allowed, and at $9 per hour this gives $1,350 adverse.

  1. A$1,350 adverseCorrect
  2. B$0
  3. C$2,700 adverse
  4. D$1,350 favourable

Explanation

Efficiency variance is based on hours worked, excluding idle time: 3,200 - 150 = 3,050 hours worked. Standard hours for output are 2,900, so 150 hours excess x $9 = $1,350 adverse. Using 3,200 hours would give $2,700 adverse, wrongly including idle time.

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