Page 131 - DMGT202_COST_AND_MANAGEMENT_ACCOUNTING

Cost and Management Accounting

Notes Time taken by the employees to change the dress.
Time take by the employees to ease themselves during the hours of production i.e going to the
toilet for easing and for refreshment going to the canteen.
The employees are paid during the above-enlisted occasions at when they do not produce
anything.
In between two different shifts, the production of finished goods do not normally take place due

to change over the control from one employee to another.

What is meant by abnormal idle time?

This is known as avoidable idle time; during which the workers are paid for nil production. This
type of idle time could be slashed down or downsized through an effective planning. This idle
time is the resultant of too many ineffective schedules, e.g. inadequate supply of raw materials,
power shortage/failure, breakdown of machinery and so on. The aforementioned could be
easily sorted out through proper planning and scheduling; which will automatically reduce the
unproductive time of labour force. Whatever the payment of wages to the working force during

the idle time are to be considered as adverse. It means that the firm makes the payment of wages
to the labourers/working force without any production/productivity.
Idle Time Variance = Idle hours × Standard Rate (Always “A”)

Labour Mix Variance

This variance arises due to deviations in between the actual mixture of labour force for the job
and standard mixture of labour force planned to complete the job. The mixture of work force
is considered to be most important for completion. Normally, the mixture is in tri colours viz.
Skilled, Semi-Skilled and Unskilled. The standards are prepared by considering the requirements
of the job to be completed. For completing the job, 5 skilled, 3 semi-skilled and 2 unskilled

employees are required. Due to non-availability of skilled labour force, the firm is required to
carry out the operations without any lacuna through the induction of more semi-skilled labour
force. The actual composition of the labour force is 2 skilled, 6 semi-skilled and 2 unskilled which

finally led to labour mix variance.
Reasons for the labour mix variance:

1. Absenteeism
2. Labour turnover
3. Non-availability of required labour force from the business environment.

The above critical factors directly influence the efficiency of the labour force.

Labour Mix Variance = Standard Rate (Revised Standard Hours – Actual Hours)
Standard hours for the job were determined for the Standard mixture of labour force but these
hours are not denominated to the tune of actual hours taken by the actual mixture of labours
force. To study the variance in between them, the standard hours should be in line with the
actual. The standard hours which are converted to the tune of actual hours is known as Revised
standard hours considered to be level platform for an effective comparison.
Labour Mix Variance = Standard Rate (Revised Standard Hours – Actual Hours)
Labour Sub-effi ciency Variance

It is one of the components of the labour effi ciency variance.
Labour Sub-efficiency Variance = Standard Rate (Standard Hours for Actual Output – Revised

Standard Hours)

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