PEV June 08
renae
Feels At HomeRegistered Posts: 76
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:
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:
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doh.....................I get it now!!!xx0

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 Taj0