Page 238 - DMGT403_ACCOUNTING_FOR_MANAGERS

Unit 11: Variance Analysis

3. Frequent change in the quality of materials may lead change in the hours required to Notes
complete the work.
4. Poor personnel relations of the workers.

11.3.4 Idle Time Variance

The wages which are paid for unproductive hours to the labourers are known as idle time. The
idle time may be classified into two categories:
1. Normal idle time

2. Abnormal idle time
What is normal idle time?

This idle time is known as authorised idle time, which can be understood in other words as
unavoidable idle time. Normally the worker is paid for that time during which he does not
produce anything.

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")

11.3.5 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.

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