Question

From the following details, Calculate :
(i) Labour Cost Variance,
(ii) Labour Rate Variance,
(iii) Labour Efficiency Variance,
(iv) Labour Mix Variance.

Workers	Standard			Actual
	Hours	Rate(Rs.)	Total(Rs.)	Hours	Rate(Rs.)	Total(Rs.)
Skilled	30	5.00	150	32	5	160
Unskilled	40	4.00	160	32	4.25	136
	70		310	64		296

 

Answer 1

Workers	Standard			Actual			Std. Proportion of Actual Input (Hours)
	Hours	Rate(Rs.)	Total(Rs.)	Hours	Rate(Rs.)	Total(Rs.)
Skilled	30	5.00	150	32	5	160	27
Unskilled	40	4.00	160	32	4.25	136	37
	70		310	64		296	64

(i) Labour Cost Variance (LCV) = (Std. Hrs. x SR) - (Actual Hrs x AR)
∴ Skilled = (30 x 5) - (32 x 5)"
= Rs. 150 (-) Rs. 160
∴ Skilled = Rs. 10 (A)
Unskilled = ( 40 x 4) - (32 x 4.25)
= Rs. 160 - Rs. 136
∴ Unskilled = Rs. 24 (F)
∴ LCV = Rs. 14 (F)

(ii) Labour Rate Variance (LRV) = (SR - AR) x Actual Hrs.
Skilled = (5 - 5) x 32 = Rs.Nil
Unskilled = (4 - 4.25) x 32 = Rs. 8 (A)
Rs. 8 (A)

(iii) Labour Efficiency Variance (LEV) = (Std. Hrs. - Actual Hrs.) x SR
Skilled = (30 - 32) x 5 = Rs. 10 (A)
Unskilled = ( 40 - 32) x 4 = Rs. 32 (F)
Rs. 22 (F)

(iv) Labour Mix Variance (LMV) = SR x Difference in Mix
Skilled = 5 x (27- 32) = Rs. 25 (A)
Unskilled = 4 x (37- 32) = Rs. 20 (F)
Rs. 5 (A)