Page 113 - P1 Integrated Workbook STUDENT 2018
P. 113
Variance analysis
Example 4
An investigation into Jayco’s labour costs discovered the following:
Worker time used per box = 4 hours (at $15 per hour)
Total labour time in the budget = 4,000 hours
Actual labour costs to make 1,100 units:
Labour paid for = 4,200 hours costing $71,400
Due to a machine breakdown Jayco’s workers weren’t able to do productive
work for all of the 4,200 hours that they were paid for. Their productive hours
were 4,180.
Calculate the labour rate, efficiency and idle time variances.
Solution
Labour rate variance
(SR – AR) × AHp (actual hours paid)
SR = $15 per hour
AR = $71,400/4,200 hours = $17 per hour
AHp = 4,200 hours
Variance = ($15 – $17) × 4,200 = $8,400 Adverse
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