Therefore gain or loss higher or lower output than

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Therefore, gain or loss (higher or lower output than the standard output) should take into account labour yield variance also. A lower output simply means that final output does not correspond with the production units that should have been produced from the hours expended on the inputs. It can be computed by applying the following formula: Labour yield variance = (Actual output Standard output based on actual hours) x Av. Std. Labour Rate per unit of output. Or Labour yield variance = (Actual loss Standard loss on actual hours) x Average standard labour rate per unit of output Labour yield variance is also known as labour efficiency sub-variance which is computed in terms of inputs, i.e., standard labour hours and revised labour hours mix (in terms of actual hours). Labour efficiency sub-variance is computed by using the following formula: Labour efficiency sub-variance = (Revised standard mix standard mix) x Standard rate 2. Labour Rate Variance: Labour rate variance is computed in the same manner as materials price variance. When actual direct labour hour rates differ from standard rates, the result is a labour rate variance. It is that portion of the direct wages variance which is due to the difference between actual rate paid and standard rate of pay specified. The formula for its calculation is: Labour rate variance = (Actual rate Standard rate) x Actual hours Using data from the example given above, the labour rate variance is Rs 25,250, i.e., Labour rate variance = (35 30) x 5050 hours = 5 x 5050 = Rs 25,250 (unfavourable)

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319 The number of actual hours worked is used in place of the number of the standard hours specified because the objective is to know the cost difference due to change in labour hour rates, and not hours worked. Favourable rate variances arise whenever actual rates are less than standard rates; unfavourable variances occur when actual rates exceed standard rates. 3. Idle Time Variance: Idle time variance occurs when workers are not able to do the work due to some reason during the hours for which they are paid. Idle time can be divided according to causes responsible for creating idle time, e.g., idle time due to breakdown, lack of materials or power failures. Idle time variance will be equivalent to the standard labour cost of the hours during which no work has been done but for which workers have been paid for unproductive time. Suppose, in a factory 2,000 workers were idle because of a power failure. As a result of this, a loss of production of 4,000 units of product A and 8,000 units of product B occurred. Each employee was paid his normal wage (a rate of? 20 per hour). A single standard hour is needed to manufacture four units of product A and eight units of product B. Idle time variance will be computed in the following manner: Standard hours lost: Product A = 4, 000/ 4 = 1,000 hr. Product B = 8, 000 / 8 = 1,000 hr.
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