Home For AAT student members AQ 2013 AAT Level 4 (Level 8 in Scotland)

Budgeting - Sample Assessment 2 AAT Website (Task 6b)

Hi there,

I'm just wondering if anyone can please clarify how to calculate the efficiency variance?

Details are as follows:

The operating statement for October showed that direct labour costs were £31,250
2,500 direct labour hours were worked and 5,000 items were made and sold
The standard cost allows 35 minutes of labour for each item at a standard labour hourly rate of £12

Many thanks in advance,
Al

Comments

  • N4TN4T AAT Student Posts: 191
    I couldn't see this question on AAT website, my sample assessment 2 had a different question, so hoping my answer is correct.

    Standard costs:
    35/60 = 0.5833 hrs per item
    £12 per hr

    Labour Efficiency Variance. Actual hours @ Std rate vs. Standard hours @ std rate

    Actual hours = 2,500 hrs
    Standard hours = 5000 items should take (@ 0.5833333hrs per item) 2916,6665 hrs

    Therefore,
    Actual hrs @ std rate 2500 hrs x £12 = £30,000
    Std hrs @ std rate 2916,6665 hrs x £12 = £35,000
    Labour efficiency variance = £5000 FAVOURABLE

    Does this match the answer you have? Sometimes rounding up too soon will give you a different answer.

  • aldo1812aldo1812 Registered Posts: 6
    yes! Thanks so much for you help! :)
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