Page 231 - Microsoft Word - 00 Prelims.docx

Advanced variances

Variance Favourable Adverse

Labour rate  Lower skilled staff  Higher skilled staff

 Cut in overtime bonus  Increase in overtime/
bonus
 Incorrect budgeting
 Incorrect budgeting

 Unforeseen wage
increase

Labour  Higher skilled staff  Lower skilled staff
efficiency
 Improved staff motivation  Fall in staff motivation

 Incorrect budgeting  Incorrect budgeting

The labour rate and labour efficiency variances may be linked. For
example, employing more highly skilled labour may result in an adverse
rate variance but a favourable efficiency variance.

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