Unfavorable Labour Efficiency Variance Example
Unfavorable labour efficiency variance means that
actual labour hours are more than standard hour and this difference is measured
at standard rate.
Actual
Hours > Standard hour = Favorable Labour Variance
Labour
Efficiency Variance = (Standard Hours- Actual Hours) x (Standard Rate)
Example
Product
A Production Demand= 1200 units
Standard
labour hour per unit of A= $ 12
Labour
requirement per unit = 6 Hours
Actual
Labour hour on production = 8000 Hours
Calculate
Labour Efficiency Variance
Solution
Standard
Hours = 1200 x 6 = 7200 hours
Labour
Efficiency Variance = (Standard hours –Actual Hours) x (Standard Rate)
=
(7200-8000) x 12
=-800
x 8
= -6,400 $ (unfavorable)
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