Question

In Bhagwati Mills Ltd. Thane standard labour cost of producing 500 metres of cloth has been specified as follows :
• Men Workers : 20 Hours @ Rs. 15 per hour
• Women Workers : 30 Hours @ Rs. 10 per hour
The actual cost data for producing 500 metres of cloth is as follows :
• Men Workers : 30 Hours @ Rs. 17 per hour
• Women Workers : 30 Hours@ Rs. 10 per hour
You ate required to calculate :
(i) Labour Cost Variance,
(ii) Labour Rate Variance,
(iii) Labour Efficiency Variance,
(iv) Labour Mix Variance.

Answer 1

Category of Workers	Standard			Actual			Std. Proportion of Actual Input (Hrs.)
	Quantity	Rate(Rs.)	Total(Rs.)	Quantity	Rate(Rs.)	Total(Rs.)
Men Workers	20	15	300	30	17	510	24
Women Workers	30	10	300	30	10	300	36
	50		600	60		810	60

(i) Labour Cost Variance (LCV) = (Std. Hrs. x SR) - (Actual Hrs x AR)
Men Workers = (20 x 15) - (30 x 17) = Rs. 210 (A)
Women Workers = (30 x 10) - (30 x 10) = Rs. Nil
Rs. 210 (A)

(ii) Labciur Rate Variance (LRV) = (SR - AR) x Actual Hrs.
Men Workers = (15 - 17) x 30 = Rs. 60 (A)
Women Workers = (10 - 10) x 30 = Rs. Nil
Rs. 60 (A)

(iii) Labour Efficiency Variance (LEV) = (Std. Hrs. - Actual Hrs.) x SR.
Men Workers - (20 - 30) x 15 = Rs. 150(A)
Women Workers - (30 - 30) x 10 = Rs. Nil
Rs. 150. (A)

(iv) Labour Mix Variance (LMV) = SR x Difference in Mix
Men workers = (24 - 30) x 15 = Rs. 90 (A)
Unskilled = (36 - 30) x 10 = Rs. 60 (F)
Rs. 30 (A)