Employees were paid for 5,200 hours but worked only 4,900 hours because of a machine breakdown. Output was 1,500 units, and the standard time is 3.2 hours per unit. The standard labour rate is £16 per hour. What are the idle time variance and the labour efficiency variance?

Correct answer: B) Idle time £4,800 adverse; efficiency £1,600 adverse

Explanation

Idle time variance = (5,200 - 4,900) idle hours x £16 = £4,800 adverse. Standard hours for actual output = 1,500 x 3.2 = 4,800. Efficiency variance = (4,800 - 4,900 hours worked) x £16 = £1,600 adverse. Efficiency is measured on hours worked, not hours paid, so that idle time is shown separately.