Same data: Labour efficiency variance is:
A₹4,000 favourable
B₹8,400 adverse
C₹4,000 adverse
D₹12,400 adverse
Answer & Solution
Correct answer: C. ₹4,000 adverse
1. Labour efficiency variance = (Standard hours − Actual hours) × Standard rate.
2. Substitute: (4,000 − 4,200) × 20 = −200 × 20.
3. = −4,000, indicating an adverse variance.
4. Hence the labour efficiency variance is ₹4,000 adverse.
_Source: ICAI BoS Inter Paper 3, Ch 13 "Standard Costing", §13.5.2 Illus 7c_
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