Idle time

aidp

Dear friends, I am confused about labour rate variance while there is idle time. for example standard rate £15, actual unit produced 11900, Actual direct labour pay was £24800, direct labour hours paid were 1600, direct labour hours worked were 1560.

I would appreciate any one of you help me.

shamil91

Hi there,

Idle time is always an adverse because it means that the workers are paid for not working reasons for this could be machines not working, awaiting materials to arrive etc. Standard rate basically means expected rate of £15. Actual units produced is 11,900. Direct labour pay means direct pay towards the manufacturing work which was £24,800 and direct labour hours paid were 1600. You are also given that the direct labour hours worked were 1560. Now to work out the idle time it will be 1600 - 1560 = 40 hours idle time. Because if you see that they were actually paid for 1600 hours but only worked for 1560 this means that 40 hours were idle time. In order to work out the actual rate per hour it will be £24,800 / (divide by) 1600 = £15.50 this means that it will be an adverse of labour rate pay because we have paid per hour 50 pence more than what we had expected of £15 per hour instead we gave £15.50 adverse. Also to work out the idle time cost it will be 40 hours x (multiply by) £15.50 actual pay per hour = £620 which will be adverse as it is idle time pay. Hope this helps you out and just confirm with me it is correct

Kind regards

Shamil