Advertisements
Advertisements
Question
From the following particulars, calculate :
(i) Labour Cost Variance,
(ii) Labour Rate Variance,
(iii) Labour Efficiency Variance.
Verify your results
Standard Hours per unit of output = 20 hours
Standard Rate per hour = Rs. 50.
Actual Production = 2,000 units.
Actual Hours = 35,000 hours.
Actual rate per hour = Rs. 40.
Advertisements
Solution
Standard Hours = 20 Hours. x 2,000 Units = 40,000
Actual Hours = 35,000
SR = Rs. 50 per hour
AR = Rs. 40
| Standard | Actual | ||||
| Hours | Rate(Rs.) | Total(Rs.) | Hours | Rate(Rs.) | Total(Rs.) |
| 40,000 | 50 | 20,00,000 | 35,000 | 40 | 14,00,000 |
| 40,000 | 20,00,000 | 35,000 | 14,00,000 | ||
(i) Labour Cost Variance = (Standard Hrs. x SR) -
(Actual Hrs. x AR)
= (40,000 x 50) - (35,000 x 40)
= 20,00,000 (-) Rs. 14,00,000
= Rs. 6,00,000 (F)
(ii) Labour Rate Variance (LRV) = (SR - AR) x Actual Hrs.
= (50 - 40) x 35,000
= Rs. 3,50,000 (F)
(iii) Labour Efficinecy Variance (LEV) = (Standard Hrs. -Actual Hrs.) x SR
= (40,000 - 35,000) x 50
= Rs. 2,50,000 (F)
