Skip to content

ACCA Applied Knowledge · Management Accounting · Reconciliation of budgeted and actual profit

Orlin Co budgeted 1,000 units with a standard of 2 hours per unit at $15 per hour. Actual output was 1,100 units, using 2,300 hours paid and worked at a total cost of $33,350. Which statement is correct?

The rate variance is $1,150 favourable and the efficiency variance is $1,500 adverse. Actual hours at standard cost $34,500 exceed the $33,350 paid, while 2,300 hours exceed the 2,200 allowed for 1,100 units by 100 hours at $15.

  1. ARate variance $1,150 adverse; efficiency variance $1,500 adverseCorrect
  2. BRate variance $1,150 favourable; efficiency variance $1,500 adverse
  3. CRate variance $1,150 adverse; efficiency variance $1,500 favourable
  4. DRate variance $1,000 adverse; efficiency variance $1,500 adverse

Explanation

Rate: 2,300 x $15 = $34,500 against actual $33,350 gives $1,150 favourable. Efficiency: standard hours 2,200, actual 2,300, so 100 x $15 = $1,500 adverse. So the correct statement is rate $1,150 favourable and efficiency $1,500 adverse.

Did you get it right without looking?

One question tells you little. A timed set on Reconciliation of budgeted and actual profit shows your real accuracy, how long you take and where you lose marks.

Practise Reconciliation of budgeted and actual profitFree diagnostic mock

More Reconciliation of budgeted and actual profit questions