Question

In: Accounting

1.2 REQUIRED: Use the information provided below to calculate the following: 1.2.1 Idle time variance (3)...

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

Solutions

Expert Solution

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)


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