Page 115 - P1 Integrated Workbook STUDENT 2018

Variance analysis

4.2 Causes of labour variances

Labour rate

 An unexpected increase in basic rates of pay.

 Payments of bonuses, where these are recorded as direct labour costs.

 Changes to the labour mix resulting in using labour that is more or less
experienced (and so more or less expensive) than the 'standard'.

 Labour shortages.

Labour efficiency

 Changes to labour motivation.

 Changes to the labour mix resulting in using labour that is more or less
experienced (and so more or less efficient) than the 'standard'.

 Improved working methods.

 Industrial action by the work force.

 Poor supervision.

 A 'learning effect' amongst the work force.

Labour idle time

 Unexpected lost time due to production bottlenecks and resource shortages.

 Machine breakdowns.

 Strike action.

 Lack of sales/production.

 Machine set-ups.

 Seasonal demand.

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