CMA Final · Strategic Cost Management · Variance Analyses
Kaveri Textiles has a standard of 4 hours per unit at Rs 150 per hour. For 1,000 units it paid for 4,200 hours, of which 200 hours were idle due to a power failure; actual wages were Rs 6,50,000 for 4,200 hours paid. What is the labour idle time variance?
The idle time variance is Rs 30,000 Adverse. It equals the 200 idle hours multiplied by the standard rate of Rs 150 per hour. Idle hours are paid for but produce nothing, so the effect on cost is always adverse.
- ARs 30,000 AdverseCorrect
- BRs 30,000 Favourable
- CRs 32,500 Adverse
- DRs 20,000 Adverse
Explanation
Idle time variance = idle hours x standard rate = 200 x 150 = Rs 30,000, adverse because paid hours produced no output. Using the actual rate (6,50,000/4,200 = about Rs 154.76) would give about Rs 30,952, and Rs 32,500 is not based on idle hours at standard rate.
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