ACCA Applied Knowledge · Management Accounting · Variance calculations and analysis
Harlow Ltd pays its production workers $12 per hour. In April, 5,000 hours were paid for, of which 400 hours were idle because of a machine breakdown. What is the idle time variance for April?
The idle time variance is $4,800 adverse. It equals the 400 idle hours multiplied by the standard rate of $12 per hour, and it is adverse because the company paid for labour time that produced no output.
- A$4,800 adverseCorrect
- B$4,800 favourable
- C$60,000 adverse
- D$55,200 adverse
Explanation
Idle time variance = idle hours x standard rate = 400 x $12 = $4,800. It is adverse because paid hours were not used productively. The $55,200 figure is the cost of the 4,600 productive hours, not the idle time.
Did you get it right without looking?
One question tells you little. A timed set on Variance calculations and analysis shows your real accuracy, how long you take and where you lose marks.
More Variance calculations and analysis questions
- The standard price of material is $4.00 per kg. During the month, Ridley Ltd purchased 5,000 kg at a total cost of $21,500 and used 4,200 kg…
- Orla Co budgeted to sell 10,000 units at $20 each with a standard variable cost of $12 per unit. Actual sales were 9,500 units, with revenue…
- A company sets its standards on the assumption of perfect operating conditions, with no machine breakdowns, no idle time and no material was…
- Torrin Co uses absorption costing and a standard fixed overhead absorption rate of $8 per labour hour. Budgeted output was 5,000 units at 2 …
- Calder Ltd uses standard costing. Standard labour cost is $10 per hour and each unit needs 4 standard hours. In March 1,000 units were produ…
- Budgeted profit for a period was $80,000. The variances were: total favourable $12,000 and total adverse $18,500. Assuming there are no othe…