CIMA BA2 · Chapter 7 · Question 4 of 14
A team was paid $63,900 for 3,600 hours worked. The standard rate is $17.50 per hour and each unit should take 3 standard hours. Output was 1,150 units. What is the labour efficiency variance?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) $2,625 adverse
Explanation
Standard hours for actual output = 1,150 x 3 = 3,450 hours. Actual hours = 3,600. Excess hours = 150 x $17.50 = $2,625 adverse. (Separately, the rate variance is $63,000 - $63,900 = $900 adverse.)
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