Page 273 - PM Integrated Workbook 2018-19

Advanced variances

Example 3

Actual production 700 units

Standard wage $4 per hour

Standard time allowed per unit 1.5 hours

Actual hours worked 1,000 hours

Actual wages paid $4,200

Calculate

(i) Labour rate variance.

1,000 hours should cost $4,000

But did cost $4,200
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Labour rate variance $200 A
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(ii) Labour efficiency:

700 units should take 1,050 hours
But did take 1,000 hours

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Variance in hours 50 hours F

× standard rate $4.00
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Labour efficiency variance $200 F

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