Labour variances, Cost Accounting

Assignment Help:

LABOUR VARIANCES

Labour Cost Variance (LCV)

Described by the ICMA, London, 'Labour cost variance is the variation between the standard direct wages specified for the production achieved, whether completed or not and actual direct wages incurred'. If the standard cost is greater, the variation is favorable and vice versa.

LCV = Standard cost of labour - Actual cost of labour

= (Standard time x Standard rate) - (Actual time x Actual rate)

Labour Rate Variance (LRV)

Described by ICMA, London, this variance is 'the variation between the standard and the actual direct labour rate per hour for the total hours worked'. If the standard rate is greater, the variance is favorable and vice versa.

LRV = Actual time (Standard wage rate x Actual wage rate)

Reasons for rate variance may be:

       · Overtime work at lower or higher than the specified rate

      · Changes in the basic wage rates

      · Faulty recruitment

      · vary in the composition of the gang at a different rate from the standard

      · Employing people of different grades than planned

    · Excessive overtime

  · lower or higher rate paid to casual laborers etc

Labour Time or Labour Efficiency Variance (LEV)

    LEV variance has been described as - 'that portion of the direct wages cost variance which is the variation between the standard direct wages cost for the production achieved whether completed or not, and the actual hours at standard rates (plus incentive bonus).This variance may be unfavorable or favorable.

LEV = Standard rate (Standard time - Actual time)

Reasons for efficiency variance may be:

  • Bad workmanship because of inefficient training or incomplete instructions or dissatisfaction among the workers
  • Production delays and hold-ups
  • Bad working conditions
  • Defective equipments, materials And tools and

       •Defective supervision

Labour Idle Time Variance (LITV)

This variance get arise because of the time during which the laborer. Remains idle because of abnormal reasons like - power failure, strikes, machine breakdowns etc.

LITV = Abnormal idle time x Standard hourly rate

Labour Mix Variance or Gang Composition Variance (LMV): This is that part of Labour cost variance that results from employing not similar grades of labour from the standard fixed in advance.   It is the variation between the standard composition of workers and the actual gang of workers.

LMV = (Standard cost of standard mix) - (Standard cost of Actual mix)

Labour Yield Variance (LYV):  It is the variation between the standard labour output and actual output or yield.  If the actual production is higher than the   actual production, it would result in a favorable variance and vice versa.


Related Discussions:- Labour variances

Job costing, XYZ Company is a family-owned bicycle manufacturing company lo...

XYZ Company is a family-owned bicycle manufacturing company located in Stow, Ohio. Until recently,it had maintained slow but steady growth in producing and marketing its only prod

Example of contract account, Example of Contract Account  A compa...

Example of Contract Account  A company has been awarded a contract to build a house.  It is a contract Number 45 for the company and the contract price is shs.2.65 millio

Valuation of inventory or closing and issues stocks, Valuation of Inventory...

Valuation of Inventory or Closing and Issues Stocks Valuation of inventory aims on attaching a monetary value in the issued or stores for production. It is useful in producing

Methods of labour remuneration, Methods of Labour Remuneration There L...

Methods of Labour Remuneration There Labour remuneration methods can be broadly classified into two factors as: i. Time rate or on the basis of the time spend in the factor

Traditional Overhead Allocation and Activity Based Costing, The controller ...

The controller for U.S. Route 66 Truck Parts is comparing traditional overhead allocationwith ABC. After studying both approaches, the controller prepared the following list of fea

Evaluate the overhead allocation rate, Vintage Auto Company manufactures pa...

Vintage Auto Company manufactures parts to order for antique cars. Vintage Auto makes everything from fenders to engine blocks. Each customer order is treated as a job. Vintage Aut

Interest earned on down payment, You sell a machine for $600,000. You allow...

You sell a machine for $600,000. You allow the client to pay 1/3 at the time of the sale and 1/3 at the end of year one and 1/3 at the end of year two. The company earns 10% on ass

Calculate the bad debt estimation, Q. 1. The 31st December 2009 trial balan...

Q. 1. The 31st December 2009 trial balance of Anika Co. reported the following information. Dr. Cr. Allowance for Bad Debts........................... $1,300 During the year 201

Working capital, What are the factors affecting working capital requiremen...

What are the factors affecting working capital requirements

Comparison between marginal and absorption costing, Comparison between Marg...

Comparison between Marginal Costing and Absorption Costing There are accountants who favour all costing method. Arguments in favour about absorption costing are specified a

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd