ACCA PM · Chapter 12 · Question 9 of 12
The standard labour time is 2 hours per unit at $12 per hour. Following new safety regulations that were not foreseen when the standard was set, a realistic standard would have been 2.5 hours per unit. Output was 1,800 units and 4,300 hours were worked. What is the labour efficiency operational variance?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) $2,400 favourable
Explanation
Revised standard hours for actual output = 1,800 x 2.5 = 4,500 hours. Operational efficiency variance = (4,500 - 4,300) x $12 = $2,400 favourable. The planning variance is (3,600 - 4,500) x $12 = $10,800 adverse, giving a total efficiency variance of $8,400 adverse.
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