Page 239 - DMGT403_ACCOUNTING_FOR_MANAGERS

Accounting for Managers

Notes 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)

11.3.6 Labour Sub-efficiency Variance

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

11.3.7 Labour Yield Variance

It is considered to be as one of the components of labour efficiency variance. This is a variance in
between two different outputs of the enterprise viz. standard output for actual hours and actual
output.
This is a variance facilitates to study the deviation in between two different levels i.e. how many
number of outputs would be produced during the actual hours and how many number of actual
outputs were produced during the actual hours.

Labour Yield Variance = Standard Cost per unit (Actual Output – Standard Output in Actual
Hours)
OR

= Standard Cost per unit (Actual Yield in Units – Standard Yield in Actual Hours)
If Actual output or Actual yield in units is greater than the standard yield in actual hours, it
means that the firm's actual production in units is greater than the standard estimates nothing
but favourable to the business enterprise.

Example: The standard and actual data of a manufacturing concern are given:
Standard time 2,000 Hrs
Standard rate per hour 2
Actual time taken 1,900 Hrs
Actual wages paid per hour 2.50
Calculate labour variances.

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