Page 382 - F2 - MA Integrated Workbook STUDENT 2018-19

Chapter 15

Labour variances

5.1 Calculations

Actual Hours × Actual Rate

Rate variance

Actual Hours × Standard Rate Total variance

Efficiency variance

Standard Hours × Standard Rate

If there is idle time, the rate variance is based on the hours actually paid whilst the
efficiency variance is based on the hours actually worked.

Idle time variance:

Actual hours worked × standard rate per hour X

Actual hours paid × standard rate per hour Y
–––––

Idle time variance this is always adverse X – Y
–––––

Variances will be favourable if Actual < Standard and adverse if Actual > Standard

Test your understanding 6

The standard cost card for product V shows that each unit requires 3 hours of
labour at a standard price of $9 per hour. Last period, 670 units of V were
produced and $17,765 was paid for 2,090 hours of labour.

The labour variances for the period are:

Labour rate variance $ A F

Labour efficiency variance $ A F

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