2. LABOR VARIANCES
Direct labor variance is the difference between the standard cost
for actual production and the actual cost in Production.
There are three kinds of labour variances:-
1) Labour Cost Variance,
2) Labour Rate Variance,
3) Labour Efficiency variance,
3. Labour Cost Variance is the difference between the Standard
Labour cost and the Actual Labour cost of the product..
Labour Cost Variance = (standard labour cost – actual labour cost)
Or
LCV = Standard time x Standard Rate ) – (Actual Time x Actual Rate)
4. Standard
WORKERS HOURS RATE PER HOUR TOTAL AMOUNT
A 10 3 30
B 15 4 60
Actual
WORKERS HOURS RATE PER HOUR TOTAL AMOUNT
A 20 3 60
B 5 4.5 22.5
5. Labour Rate Variance is the difference between the Standard
cost and the Actual cost paid for the actual number of hours..
Labour Rate Variance =
Actual Time (Standard Rate – Actual Rate)
6. Labour efficiency variance is the difference between the standard
labour hour that should have been worked for the actual number
of units produced and the actual number of hours worked when
the labour hours are valued at the standard rate.
Labour efficiency variance =
Standard Rate (Standard Time - Actual Time)
7. Verification:-
LCV = LEV + LRV
Labour Cost Variance =
Labour Efficiency variance + Labour Rate Variance
8. 4) Labour Yield Variances =
Standard costing per unit (Actual output – standard output)
Where,
Standard costing per unit = Total Standard Cost / Standard Output
9. A group of workers consists of 10 men, 5 women & 5 boys. They are
paid at standard rates as under:-
Men Rs. 1.25
Women Rs. 0.80
Boys Rs. 0.70
In a normal working week of 40 hours, the group is expected 1000 units.
During the week ended 31st June, 2005, the group consisted 13 Men,
4 Women & 3 Boys. The actual wages rates are as follows:-
Men Rs. 1.20
Women Rs. 0.85
Boys Rs. 0.65
2 hours were lost due to abnormal time and 960 units were produced.
Calculate All Labour Variances.
