CA INTERMEDIATE: COSTING & FM · STANDARD COSTING

Labour variances: rate, efficiency and cost

Positive = Favourable (F), negative = Adverse (A). LRV = (SR − AR) × AH paid; LEV = (SH − AH) × SR; LCV = SC − AC (no idle time assumed).

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Worked examples

Example 1 · level 1

Kapoor Electricals — Standard hours for actual output 1,850 @ ₹110/hour. Actual hours worked and paid 1,690 @ ₹130/hour (no idle time). Find the labour rate variance.

₹37,000 (A)
₹33,800 (F)
₹33,800 (A)
₹37,000 (F)

Show solution

LRV = (110 − 130) × 1,690 = -33,800 → ₹33,800 (A).

Answer: ₹33,800 (A)

Example 2 · level 2

Nair Spices Pvt Ltd — Standard hours for actual output 600 @ ₹45/hour. Actual hours worked and paid 800 @ ₹40/hour (no idle time). Find the labour efficiency variance.

₹9,000 (A)
₹8,000 (A)
₹8,000 (F)
₹9,000 (F)

Show solution

LEV = (600 − 800) × 45 = -9,000 → ₹9,000 (A).

Answer: ₹9,000 (A)

Example 3 · level 3

Reddy Cements — Standard hours for actual output 1,500 @ ₹165/hour. Actual hours worked and paid 1,320 @ ₹150/hour (no idle time). Find the labour cost variance.

₹49,500 (F)
₹49,500 (A)
₹29,700 (F)
₹19,800 (F)

Show solution

LCV = ₹2,47,500 − ₹1,98,000 = 49,500 → ₹49,500 (F).
Check: LRV ₹19,800 (F) + LEV ₹29,700 (F) = ₹49,500 (F).

Answer: ₹49,500 (F)