CA Intermediate · Cost and Management Accounting · Standard Costing
Kaveri Textiles has a standard of 5 hours per unit at Rs 40 per hour. In a month it produced 800 units. Hours paid were 4,300 and hours actually worked were 4,000, because 300 hours were idle due to a power failure. Actual wages paid were Rs 1,76,300. What is the labour efficiency variance?
The labour efficiency variance is nil. Standard hours for 800 units are 4,000 and the hours actually worked are also 4,000. The 300 idle hours caused by power failure are shown separately as an idle time variance, not as an efficiency variance.
- ARs 0Correct
- BRs 12,000 Adverse
- CRs 12,000 Favourable
- DRs 8,000 Favourable
Explanation
Standard hours for actual output = 800 x 5 = 4,000 hours. Efficiency variance = (SH - AH worked) x SR = (4,000 - 4,000) x 40 = nil. The idle time variance of 300 x 40 = Rs 12,000 Adverse is separate; including it in efficiency is the mistake behind Rs 12,000 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
- Rao Appliances Ltd budgeted sales of 2,000 units at standard selling price Rs 500 and standard cost Rs 380. Actual sales were 2,200 units at…
- Meera Chemicals has a budgeted fixed overhead of Rs 6,00,000 for 20,000 units, a rate of Rs 30 per unit. Actual output was 18,500 units and …
- Shree Textiles sets a standard of 4 kg of yarn per unit of cloth at Rs 90 per kg. In a month it produced 1,500 units of cloth and used 6,150…
- Kaveri Components budgeted 2,000 labour hours at a standard rate of Rs 120 per hour for 1,000 units. Actual output was 1,100 units. Actual h…
- In standard costing, which statement about the material mix variance is correct?
- Vihaan Textiles uses standard costing. Standard material cost per unit of output is 4 kg at Rs 50 per kg. In a month, 1,000 units were produ…