Section A

ServeRight Firm pays its staff for 40 hours a week at a standard rate of $20 per hour. Last week, due to a server outage, staff were idle for 5 hours but were still paid. What is the idle time variance for one staff member for the week?

Answer options:

$100 Favorable

$100 Adverse

$800 Adverse

$700 Favorable

How to approach this question

Multiply the number of idle hours by the standard hourly rate. Idle time is always adverse.

Full Answer

B.$100 Adverse✓ Correct

Idle time variance is calculated as the idle hours multiplied by the standard labor rate. 5 hours * $20 = $100. Because the company paid for time that produced nothing, it is an Adverse variance.

Common mistakes

Calculating it as favorable, or subtracting it from total pay incorrectly.

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Practice the full ACCA MA — Management Accounting Practice Exam 3

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