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Labour Variances
From our basic data, we can calculate the labour variances as given as:
i. Labour Rate Variance = (AH x AR) - (AH x SR)
= AH (AR - SR)
NB: AH x AR = Shs.64, 350
Labour Rate Variance = 64,350 - (4,500 x 14)
= Shs.1, 350 Unfavourable.
The rate is unfavorable since we spent more than expected.
ii. Labour Efficiency as usage variance: = (AH X SR) - (SH x SR)
= (AH - SH) SR
= (4,500 - 5,000) 14
= 7,000 Favourable
The variance is favourable since we spent less than the expected cots.
Note: Total Labour Variance = Rate Variance + Efficiency Variance
= 1,350 (Unfavourable) + 7,000 (Favourable)
= Shs.5, 650 Favourable.
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