In orde to understand the effect of variation in number of hours planned and number of hours actually used to produce the products, the efficiency or hour variance is used.
Efficiency variance = (Actual hours - Standard hours) x Standard rate
Following data is available for Alpha industry:
Labour 20,000 hours @ $2.66 per hour = $53,200/-
Labour 19,866 hours @ $2.84 per hour = 56,420/-
Calculate efficiency or hour variance?
Efficiency variance = (Actual hours - Standard hours) x Standard rate = (19,866 - 20,000) x 2.66 = $356.44 Favourable
Related Posts: Labour Efficiency Variance MCQS