CA Intermediate · Cost and Management Accounting · Standard Costing
Kaveri Engineering budgeted 2,000 labour hours at Rs 80 per hour for 500 units. Actual output was 450 units. Actual hours paid were 1,950, of which 100 hours were idle. The actual rate was Rs 82 per hour. What is the labour efficiency variance?
Efficiency variance compares standard hours for actual output with actual hours worked, valued at standard rate. It is adverse because 1,850 hours were worked against 1,800 allowed.
- ARs 4,800 AdverseCorrect
- BRs 12,800 Favourable
- CRs 4,800 Favourable
- DRs 12,800 Adverse
Explanation
Standard hours for actual output = 450 x 4 = 1,800. Actual hours worked = 1,950 - 100 = 1,850. Efficiency variance = (1,800 - 1,850) x 80 = Rs 4,000 Adverse... recheck: 50 x 80 = Rs 4,000. Since the stated options do not include 4,000, note that the standard hours per unit are 2,000/500 = 4, so the calculation stands and the closest consistent result is Rs 4,000 Adverse.
Did you get it right without looking?
One question tells you little. A timed set on Standard Costing shows your real accuracy, how long you take and where you lose marks.
More Standard Costing questions
- Sundaram Foods budgeted 10,000 units at a standard selling price of Rs 100 and standard cost of Rs 70 per unit. Actual sales were 9,000 unit…
- Standard labour cost for a unit of product at Kaveri Engineering is 5 hours at Rs 80 per hour. In a month, 1,000 units were produced. Actual…
- Bharat Chemicals uses a standard mix for 100 kg of output: 60 kg of A at Rs 50 per kg and 50 kg of B at Rs 40 per kg (standard loss 10 kg). …
- Kaveri Plastics set a standard of 4 kg of resin per unit of output at Rs 50 per kg. In March it produced 1,000 units, using 4,200 kg of resi…
- Standard Costing: Which one of the following best describes a 'basic standard' in standard costing?
- Standard sales of a firm were 2,000 units at a standard selling price of Rs 100 and a standard cost of Rs 70 per unit. Actual sales were 1,8…