Solution Labour Efficiency Variance Standard wage rate x Standard hours Actual

Solution labour efficiency variance standard wage

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

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