ACCA Applied Skills · Performance Management · Standard costing
Dale Co has a standard labour rate of $8 per hour. Last month 3,000 hours were paid for and 2,760 hours were worked. What is the idle time variance?
The idle time variance is $1,920 adverse. There were 240 hours paid but not worked (3,000 less 2,760), valued at the standard rate of $8 per hour. Because the company paid for time that produced nothing, the variance is always adverse.
- A$1,920 adverseCorrect
- B$2,400 adverse
- C$1,920 favourable
- D$22,080 adverse
Explanation
Idle hours = 3,000 - 2,760 = 240. At the standard rate of $8 this is $1,920. Idle time always represents paid but unproductive time, so it is adverse. $2,400 wrongly uses a different base of 300 hours.
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