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.