PEV June 08

renae

Hi,

Hopefully I am just having a funny five minutes with this paper, but task 1.1 b (11) Wants to know the direct labour efficiency variance, and i the answer it gives 8 x 600 = 4,800 & 8 x 630 = 5,040........WHERE DID THE 630 COME FROM??????????????????:glare:

renae

doh.....................I get it now!!!xx

Khurram Taj

Hello Renae

Budgeted hours for 200 tonnes are 600, so it means 600/200 = 3Hours for one tonne. However standard hours for actual production are 3Hours x210 tonne = 630 Hours

When you calculate Labour efficiency variance then the standard formula is:-

Standard rate x (Standard hours – Actual hours)

£8.00 x (630 – 600) = £240 F

Direct labour efficiency is £240 favourable is because if for 210 tonnes crumb we need 600 standard hours according to budget but they used only 600 hours; therefore the efficiency variance is favourable.

Best Regards

Khurram Taj