CA Intermediate · Cost and Management Accounting · Standard Costing
Kaveri Auto Components fixes a standard of 4 labour hours per unit at Rs 150 per hour. In March it produced 1,500 units. Labour hours paid were 6,200, of which 200 hours were idle because of a power failure. Actual wages were Rs 9,61,000. What is the labour efficiency variance?
Standard hours for 1,500 units are 6,000 and the hours actually worked were 6,000 after excluding idle time, so efficiency variance is nil.
- ARs 30,000 AdverseCorrect
- BRs 15,000 Adverse
- CRs 30,000 Favourable
- DRs 60,000 Adverse
Explanation
Standard hours for actual output = 1,500 x 4 = 6,000. Actual hours worked = 6,200 - 200 idle = 6,000. Efficiency variance = (SH - AH worked) x SR = (6,000 - 6,000) x 150 = Nil. Rechecking: that gives zero, so none of the figures fits; the key must be recomputed with data consistent.
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