To produce a particular batch of product, Foster Corporation paid its workers Rs.12.00 per hour for…
The labour efficiency variance is Rs. 5,000 favourable. It equals the standard hourly rate multiplied by standard hours minus actual hours: 12.50 × (4,400 − 4,000) = 5,000.…
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To produce a particular batch of product, Foster Corporation paid its workers Rs.12.00 per hour for 4,000 hours of work. The standards for the quantity of work represented by the batch were Rs.12.50 per hour and 4,400 hours. What was the labor efficiency variance?
Answer and explanation
Correct answer B
The labour efficiency variance is Rs. 5,000 favourable. It equals the standard hourly rate multiplied by standard hours minus actual hours: 12.50 × (4,400 − 4,000) = 5,000. Using fewer hours than the standard allowed creates a favourable efficiency variance; the actual hourly rate is used for the rate variance.
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Telangana SET (TG SET)