Calculate the variances for GEL in respect of manufacture of part 'SAT' by (i) Traditional variance analysis ; and (ii) Operational variances…

8 Workings To calculate the original time required for 10 units, we can use the fact that productivity increased by 25%, meaning the new time is 75% of the original time. Let the original time for 10 units be x. After a 25% productivity increase, the new time is 0.75x, and we know this equals 10 hours: 0.75x = 10 Solving for x: x = 10/0.75 x = 13.33 hours The original time to produce 10 units was 13.33 hours. Original Standards (ex-ante) Revised Standards (ex-post) Actual (3,600 units) 3,600 units × 1.33. hr. × ₹ 30.00 3,600 units x 0.75 hr.× ₹ 30.00 3,600 units x 1 hr. × ₹ 25 1,44,000 81,000 90,000 Computation of Variances (i) Traditional Variances Efficiency Variance = (4,800 hrs. - 3,600 hrs.) × ₹ 30 = 36,000 (F) Rate Variance = (₹ 30 -25) × 3,600 hrs. = 18,000 (F) Total Variance = 36,000 (F) +18,000 (F) = 54,000 (F) (ii) Operational Variances Efficiency Variance = (2,700 hrs. - 3,600 hrs.) × ₹ 30.00 = 27,000 (A) Rate Variance = (₹ 30 -25) × 3,600 hrs. = 18,000 (F) Total Variance = 27,000 (A) +18,000 (F) = 9,000 (A) Planning Variances Efficiency Variance = (4,800 hrs. - 2,700 hrs.) × 30 = 63,000 (F) Rate Variance = (₹ 30 -30) × 2,700 hrs. = 0 Total Variance = 63,000 (F) +0 = 63,000 (F) Note: While solving this question actual hourly rate of production has been considered 1 hour per unit as question clearly states that GEL adopted change in technology (by which its productivity increased by 25%) due to labour efficiency such that it can produce 10 units in 10 hours. Therefore, computation of original standard time is required to be computed by doing reverse calculations as given in working. The Standard Time arrived to 1.33...hour per unit. Revised standard time is given 0.75 hour per unit. However, this question can also be solved by taking alternative assumptions.