ExpertEasy2 marksMultiple Choice
ACCA · Question 28 · Standard costing
A remote software development team has a standard labor rate of $40 per hour. During the week, they were paid for 500 hours, but due to a server outage, 50 hours were recorded as idle time.
What is the idle time variance?
A remote software development team has a standard labor rate of $40 per hour. During the week, they were paid for 500 hours, but due to a server outage, 50 hours were recorded as idle time.
What is the idle time variance?
Answer options:
A.
$2,000 Favorable
B.
$2,000 Adverse
C.
$18,000 Adverse
D.
$0
How to approach this question
Idle time variance is simply the idle hours multiplied by the standard labor rate. It is always adverse.
Full Answer
B.$2,000 Adverse✓ Correct
Idle time variance represents the cost of paying workers when they cannot work.
Variance = 50 idle hours * $40 standard rate = $2,000. Since money was paid for no output, it is Adverse.
Common mistakes
Trying to calculate efficiency variance instead of idle time variance.
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