CAF-5 · Chapter 11 · Question 3 of 10
Product X has a standard labour requirement of 4 hours per unit at a standard rate of Rs. 50 per hour. During the period, 1,000 units were produced using 4,050 actual hours. What is the direct labour efficiency variance?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Rs. 2,500 Adverse
Explanation
Labour Efficiency Variance = (Standard Hours allowed for actual production – Actual Hours worked) × Standard Rate. Standard hours for 1,000 units = 1,000 × 4 = 4,000 hours. Calculation: (4,000 hours – 4,050 hours) × Rs. 50 = (50 hours) × 50 = Rs. 2,500. Because actual hours exceeded standard hours, the variance is Adverse.
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