In: Accounting
1.2 REQUIRED: Use the information provided below to calculate the following:
1.2.1 Idle time variance (3)
1.2.2 Labour mix variance (7)
1.2.3 Labour yield variance (3)
Indicate whether each variance is favourable or unfavourable.
INFORMATION:
Standard labour costs for Electro Manufacturers to manufacture 2 000 units:
400 hours at R70 per hour
200 hours at R35 per hour
Actual labour costs incurred to produce 1 900 units:
290 hours at R R65 per hour
170 hours at R32 per hour
Idle time represents 10% of the recorded labour hours
1) Actual Time worked (10% is idle so actual worked is 90%)
Labour | Calculation | Hours worked |
1st | 290 x 0.90 | 261 hours |
2nd | 170 x .9 | 153 hours |
Total | 414 Hours |
Standard output is 2000 units
actual output is 1900 units
2) Standard mix ( its standard ratio for actual times worked)
Ratio is 400 hours : 200 Hours
1st 414 / 600 x 400 = 276 hours
2nd 414 / 600 x 200 = 138 hours
3) Standard Time for actal output
1st = 400 hours / 2000 units x 1900 units = 380 hours
2nd= 200/2000 x 1900 units =190 hours
3) Idle time variance
Standard rate x Actual times worked - Standard rate x Actual time paid
1st = 70 x 276 - 70 x 290 = 2030 (a)
2nd = 70 x 153 - 70 x 170 = 1190 (a)
Total = 2030(a)+ 1190 (a) = 3220 Adverse
4) Labour mix variance
Standard rate x Standard mix - Standard rate x axtual time worked
1st = 70 x 276 - 70 x 261 = 1050 (F)
2nd = 70 x 138 - 70 x 153 = 1050 ( A)
Total = 1050(adverse) + 1050 (favourable) = 0
5)Labour yield variance
Standard rate x stnadard time - Standard rate x standard mix
1st 70 x 380 - 70 x 276 = 7280 (F)
2nd 70 x 190 - 70 x 138 = 3640 (f)
Net = 7280(F) + 3640 (F) =10920 (F)