Page 37 - Cost Accounting - Ready Reckoner

34

2. Labour Cost Variance (LCV)

Labour Cost Variance
(LCV)
1-2

SHSR - AHAR

Labour Rate Variance Labour Efficiency
(LRV) Variance (LEV)
3 - 2 1 - 3

(SR - AR)AH (SH - AH)SR

Labour Gang Mix Labour Sub-efficiency
Variance (LGMV) Variance (LSEV)
4 - 3 1 - 4
(RSH - AH)SR (SH - RSH)SR

SR = Standard wage rate/ hour
AR = Actual Wage rate/ hour
AH = Actual hours
SH = Standard Hours
RSH = Revised Standard Hours

1 2 3 4
SHSR AHAR AHSR RSHSR

LCV = LRV + LEV
LEV = LGMV + LSEV

 Labourers are paid time wages.

 Standard hours are always found for actual production.
 Revised Standard Hours (RSH) is actual Hours in Standard Mix.

 RSH arises when different classes of workers are working in a factory.
Eg. Man woman (or) skilled, semi-skilled, unskilled, etc.