LABOUR VARIANCE- LABOUR MIX & IDLE TIME

Labour mix variance (gang composition variance)=

total actual time x standard wages for Standard Time - standard wages for actual labour mix
total Standard Time

Labour ideal time variance= ideal time x standard rate

Jain & Narang

Q 23

Solution
[a] Actual output-1,600 units
Standard Actual
Actual
time(number
of employees x
Standard time Standard total number Actual Actual
(W.N:1) rate Standard cost of hours) rate Cost
MEN 960 0.8 768 40 * 40= 1600 0.7 1120
WOMEN 480 0.6 288 10 * 40 =400 0.65 260
BOYS 320 0.4 128 5 * 40= 200 0.3 60
total 1760 1184 2200 1440

WORKING NOTE:
Standard time for 2000
units Standard Time for 1600 units
MEN 30 * 40= 1200 1200 / 2000 * 1600= 960
WOMEN 50 * 40= 600 600 / 2000 * 1600= 480
BOYS 10 * 40= 400 4000 / 2000 * 1600= 320
total 2200 1760

[b] Labour variances

i. Labour cost Variance (LCV) = standard cost -actual cost
=1184 – 1440= ₹256(A)
ii. labour rate variance (LRV) = actual time ( standard rate - actual rate)
men = 1600 (0. 8 - 0. 7)= Rs 160 (F)
women = 400 (0. 6 - 0.65)= ₹20 (adverse)
boys = 200 (0. 4 -0. 3)= ₹20 (favourable)
labour rate variance= ₹ 160 (favourable)

iii. labour efficiency variance (LEV) = standard rate( standard time - actual time)

working note 2: actual time to be calculated, taking into account the idle time
normal working hours= 40 hours idle time= 4 hours, therefore actual time= 40 - 4 = 36 hours

men = 40 * 36= 1440

women = 10 * 36= 360
boys = 5 * 36= 180
total= 1980 hours

LEV= men = 0. 8 (1200 – 1440)= Rs 384 (adverse)

women = 0. 6 (600 – 360)= ₹ 72 (favourable)
boys = 0. 4 (400 – 180)= ₹ 56 (favourable)
labour efficiency variance= ₹ 256 (adverse)

iii. Labour mix variance (gang composition variance)=

total actual time x standard wages for Standard Time - standard wages for actual Time
total Standard Time

Total actual time= 2200 hours

total Standard Time= 2200 hours
standard wages for Standard Time = (960x 0.8)+ (480x 0.6)+ (320x 0.4)= rs. 1480
standard wages for actual labour mix= (1600 * 0.8)+ (400x 0.6)+ (200x 0.4)= rs. 1600
LMV= (2200 / 2200 * 1480) - 1600 = ₹120 (A)

iv. Labour idle time variance = idle time x standard rate

(Note: Idle Time of 4 hours. Idle time variance will be always Adverse)
men= 40 * 4 * 0.8= ₹128(A)
women= 10 * 4 * 0.6= 24(A)
boys= 5 * 4 * 0.4= 8(A)
labour ideal time variance= ₹160(A)
 c. Verification
LCV=LRV+LEV+LITV
256(A)= 160 (F)+256(A)+160(A)
256 (A)= 256 (A)

Q 22 Jain & Narang

[a]
Standard Actual
Standard time Standard Actual
(W.N:1) rate Standard cost Actual time Actual rate Cost
M 1,50,000
N 3,00,000
total 5.10543 23,00,000
4,50,000 5 22,50,000 4,50,500 (23,00,000/4,50,500)

WORKING NOTE:

Standard time for 1 unit Standard Time for 10000 units

M 15 15 * 10,000= 1,50,000
N 30 30 * 10,000= 3,00,000
TOTAL 4,50,000
[b]
i. Labour cost Variance (LCV) = standard cost -actual cost
= 22,50,000 - 23,00,000 = ₹50,000(A)

ii. Labour rate variance (LRV) = actual time ( standard rate - actual rate)
= 4,50,500 (5-5.10543)= Rs. 47,500 (A)

iii. labour efficiency variance (LEV) = standard rate( standard time - actual time)
= 5( 4,50,000-4,50,500)= Rs 2,500 (A)

[c] Verification= LCV= LRV+LEV

50,000 (A)= 47,500 (A)+2,500 (A)