Solution:
Labour Efficiency
Variance
=
Standard wage rate
x (Standard hours – Actual hours)
=
4 x (15,300 – 15,000)
= 12,000 (Adverse)

Idle Time Variance
It is a sub-variance of Wage Efficiency or Time Variance.
The standard cost of actual hours of any employee may remain idle due to abnormal
circumstances like strikes, lock outs, power failure etc. Standard cost of such idle
time is called Idle Time Variance. It is always adverse or unfavourable.
Can be computed using the formula:
Idle Time variance = Idle Hours x Standard Rate per hour
If there are idle hours, actual hours used in mixed variance and yield variance will be
reduced by idle hours. Revised standard hours will also be calculated on adjusted
actual hours. But in the calculation of Efficiency and rate variance, total actual hours
will be taken.

Labour Mix Variance
The composition of actual gang of labour may differ from composition of standard
gang due to shortage of a particular grade of workers or some other reason.
It is that portion of the wages variance which is due to the difference between the
actual labour grades utilized and the standard labour grades specified.
Can be computed using the formula:
Labour Mix variance = (Revised Standard labour hours – AH ) x Standard Wage rate
Revised Standard hours =
x SH

Labours Yield Variance
The Labour yield variance occurs when there is a difference between standard
output and actual output.
It is that portion of the Labour Efficiency variance which is due to the difference
between the actual yield obtained and the standard yield specified.
Can be computed using the formula:
Labour Yield variance
= Standard labour Cost per unit x (Standard yield or
output for actual mix– Actual yield or output)
Standard yield is the output which should result on input of actual hours mix.
Standard labour Cost per unit
= Total cost of standard mix of Labour
Net standard output

Example 11
A gang of workers usually consists of 10 men, 5 women and 5 boys in a factory. They
are paid at standard hourly rates of Rs. 1.25, Rs. 0.80 and Rs. 0.70 respectively. In a
normal week of 40 hours the gang is expected to produce 1000 units of output.
In certain week, the gang consisted of 13 men, 4 women and 3 boys. Actual wages
were paid at the rates of Rs. 1.20, Rs. 0.85 and Rs. 0.65 respectively. Two hours were
lost due to abnormal idle time and 960 units of output were produced.
Calculate various labour variances.

Solution 11
Workers
Standard
Actual
Hours
(Workers
x week)
Rate
(Rs.)
Amount (Rs.)
Hours
(Workers x
week)
Rate
(Rs.)
Amount (Rs.)
Men
400
1.25
500
520
1.20
624
Women
200
0.80
160
160
0.85
136
Boys
200
0.70
140
120
0.65
78
Total
800
800
800
838
Solution:
Direct Labour Cost Variance
=
Standard cost for actual output – actual cost
Standard cost for actual output
=
Standard cost per unit x actual output
=
Rs. 800/1000 units x 960 units = Rs. 768
DLCV
=
768 – 838 = Rs. 70 (A)
Continued…

Solution 11
Solution:
Direct Labour Rate Variance
=
Actual hours (Standard wage rate – actual wage rate)
Men
=
520 (1.25 – 1.20) = Rs. 26 (F)
Women
=
160 (0.80 – 0.85) =
8 (A)
Boys
=
120 (0.70 – 0.65) =
6 (F)
Total
Rs. 24 (F)
Direct Labour efficiency variance
=
Standard wage rate (standard time for actual
output – actual time paid for)
Continued….

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- Fall '17
- nisha
- Cost Accounting, Variance, Direct material price variance, Rs., actual output, standard output