A company has an inspection department in which operatives examinefruit in order to extract blemished input before
Question:
A company has an inspection department in which operatives examinefruit in order to extract blemished input before the fruit istransferred to a processing department. The input to the inspectiondepartment comes from a preparation department where the fruit is washedand trimmed.
Inventories cannot be built up because of the perishable nature ofthe fruit. This means that the inspection department operations arelikely to have some idle time during each working day.
A standard output rate in kilos per hour from the inspectionprocess has been agreed as the target to be aimed for in return forwages paid at a fixed rate per hour irrespective of the actual level ofidle time.
The standard data for the inspection department are as follows:
(i)standard idle time: as a percentage of total hours paid for: 20%;
(ii) standard wage rate per hour: $6.00;
(iii)standard output efficiency is 100% i.e., one standard hour of work is expected in each hour excluding idle time hours;
(iv)wages are charged to production at a rate per standard hour sufficient to absorb the standard level of idle time.
The labour variance analysis for November for the inspection department was as follows:
The actual data for the inspection department for the three months December to February are as follows:
Required:
(a)to calculate the labour productiveefficiency variances, excess labour idle time variances and labour ratevariances for each of the three months December to February. Interpretthe variances calculated.
(12 marks)
(b)in order to highlight the trend andmateriality of the variances calculated in (a) above, express them aspercentages of the standard
Intermediate Accounting
ISBN: 978-0071339476
Volume 1, 6th Edition
Authors: Beechy Thomas, Conrod Joan, Farrell Elizabeth, McLeod Dick I