Skip to content

ACCA Strategic Professional · Strategic Business Leader · Cost and management accounting

Marlow Ltd's standard labour rate is $12 per hour, with 3 hours per unit. In a month it produced 2,000 units, paid for 6,400 hours at $12.50, but only 5,900 hours were actually worked because of a machine breakdown. Which figure correctly gives the labour idle time variance and efficiency variance?

Idle time variance is $6,000 adverse, being 500 paid but unworked hours at $12. Efficiency is $1,200 favourable because 5,900 hours worked beat the 6,000 standard hours for output. Efficiency must be measured on hours actually worked, not hours paid.

  1. AIdle time $6,000 adverse; efficiency $1,200 favourableCorrect
  2. BIdle time $6,000 adverse; efficiency $3,600 adverse
  3. CIdle time $5,000 adverse; efficiency $1,200 favourable
  4. DIdle time $6,000 favourable; efficiency $1,200 adverse

Explanation

Idle time = (6,400 - 5,900) x $12 = $6,000 adverse. Standard hours for 2,000 units = 6,000; efficiency = (6,000 - 5,900) x $12 = $1,200 favourable. Option B wrongly measures efficiency against paid hours.

Did you get it right without looking?

One question tells you little. A timed set on Cost and management accounting shows your real accuracy, how long you take and where you lose marks.

Practise Cost and management accountingFree diagnostic mock

More Cost and management accounting questions