Page 39 - Managerial Accounting-MGT 145

Module 7: Variance Analysis
In this unit, we examine how managers analyze the difference
of their budgets and actual results to make better decisions.

We will explore methods for rationalizing the budget versus
the actual results.

Labor Variance Analysis
The processing of one (1) product requires a standard time of
0.8 direct labor hours per unit for Operation 4-802 and a
standard wage rate of P6.75 per hour.

In actual operation, 2,000 units required 1,580 direct labor
hours at a cost of P6.90 per hour.

Required: Calculate/ Compute for the following
 Labor rate variance or Labor price variance.
 Labor efficiency or usage or quantity variance.

Solution: Time Rate Amount
Actual hours worked 1,580 P 6.90 actual P 10,902
Standard hours worked 1,580 P 6.75 standard P 10,665
-------- -------- --------
P237
Labor rate/amount variance 1,580 0.15 unfavorable
unfavorable
===== ===== =====
Actual hours worked 1,580 P 6.75 standard P 10,665
Standard hours allowed 1,600 P 6.75 standard P 10,800
---------- ------------ -----------
Labor efficiency variance (time) -20 6.75 standard P(135) favorable
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