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Question
From the following information calculate:
(i) Labour Cost Variance,
(ii) Labour Rate Variance,
(iii) Labour Efficiency Variance.
| Gross direct wages | Rs. 3,000 |
| Standard hours for production | 1,600 Hrs. |
| Standard rate per hour | Rs. 1.50 |
| Actual hours for Production | 1,500 Hrs. |
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Solution
Calculation of Standard Gross Wages :
Standard Gross Wages = Standard Hours. x Standard Rate per Hour
= 1,600 Hours x Rs. 1.50
∴ Standard Gross Wages = Rs. 2,400
Calculation of Actual Rate of Wages :
`"Actual Rate of Wages"="Actual wages"/"Actual hours"`
`=("Rs."3,000)/(1,500 "hours")`
∴ Actual Rate of Wages = Rs. 2
| Standard | Actual | ||||
| Hours | Rate(Rs.) | Total(Rs.) | Hours | Rate(Rs.) | Total(Rs.) |
| 1,600 | 1.50 | 2,400 | 1,500 | 2 | 3,000 |
| 1,600 | 2,400 | 1,500 | 3,000 | ||
(i) Labour Cost Variance (LCV) - (S Hrs. x SR) - (Actual Hrs. x AR)
∴ LCV = (1,600 x 1.50) - ( 1,500 x 2)
∴ LCV = Rs. 2,400 (-) 3,000
∴ LCV = Rs. 600 (A)
(ii) Labour Rate Variance (LRV) = (SR - AR) x Actual Hrs.
∴ LRV = (1.50 - 2.00) x 1,500
∴ LRV = Rs. 750 (A)
(iii) Labour Efficiency Variance (LEV) = (Std. Hrs. -Actual Hrs.) x SR
∴ LEV = (1,600 - 1,500) x Rs. 1.50
∴ LEV = Rs. 150 (F)
