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Registered Posts: 21 New contributor 🐸
The standard cost per unit of product W includes:
Direct material:7kg at £8.00 per kg
Direct labour :4 hours at £5.00 per hour
In a given period ,the actual results were that 16,000 units of W were produced,using 113,600kg of direct material and taking 68,640 direct labour hours.The total cost of direct material was £920,160 and the total cost of direct labour was £336,336.

I've caculated the direct labour total variance is 16336 A , in which the direct labour rate variance is 6864 F and the direct labour efficiency variance is 23200 A

after calculating the variance ,additional information becomes available:

Production workers are new to this work and are currently taking 10%longer to make a unit of W than they will when fully trained .
The question is : how to calculate the part of the direct labour efficiency variance due to the production workers not yet being fully trained and the part due to other reasons.

The part of the direct labour efficiency variance due to the production workers not yet being fully trained :(4-4*1.1)*16000*5=32000A
The part due to other reasons: (4*1.1*16000-68640)*5=8800F

Am I right?

• Registered, Moderator Posts: 2,034 mod
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taking 68,640 direct labour hours
Production workers are new to this work and are currently taking 10%longer to make a unit of W than they will when fully trained

So when they are fully trained they will take: 68,640/110% direct labour hours 62,400

And if that had happened during the period you are looking at, you would have had a labour efficiency variance of: £8,000 favourable

And the lack of training of these workers has caused a variance of : £31,200 adverse

So why might these new and untrained staff have a favourable variance?
1. new machines?
2. enthusiasm for the new job?
3. the fact that they are in a new factory with new facilities has raised their motivation?
4. younger and more enegetic than those at the main factory where the standards were set?
Sandy
sandy@sandyhood.com
www.sandyhood.com
• Registered Posts: 21 New contributor 🐸
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Thanks Sandy!

Does it mean the revised direct labour hour is 62400/16000=3.9

then variance due to revised standard is
standard direct labour of actual quantity minus revised direct labour of actual quantity
(4-3.9)*16000*5=8000 F

"REAL"VARIANCE IS
revised direct labout of actual quantity minus actual direct labour of actual quantity
(3.9-68640/16000)*16000*5=31200A
• Registered, Moderator Posts: 2,034 mod
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Yes
when they have been trained the standard hours per unit will be 3.9
Sandy
sandy@sandyhood.com
www.sandyhood.com