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Q#(4) Which of the following would explain a labour efficiency planning variance?
(1) A change in employment legislation requiring staff to take longer rest periods.
(2) Customers demanding higher quality products leading to a change in product
design.(3) The learning effect for labour being estimated incorrectly in the production
budget.ANS: ALL THE THREE STATEMENTS ARE TRUE
_____________________________________________Dear Tutor! How the 3rd statement is the explanation for labour efficiency PLANNING variance because estimations are in the hand of management and hence it is controllable so why the 3rd statement is also correct ?
As explained in my free lectures, operational variances are looking at whether the operational managers are performing better or worse than could reasonably be expected. If the cost is budgeted wrongly (as is the case here) then this is a planning variance and the effect is not the fault of the operational manager.
Have you watched my free lectures on planning and operational variances?So I will take it like that planning variances are those variances which are uncontrollable and also those variances which not planned properly.
So here is one more question arise what if operational manager is responsible setting estimations and involve in budgeting process ?The planning variances are those that are not controllable by the operational manager during the production.
If the operational manager is responsible also for the budgets, then he/she is responsible if the budgeting was done wrongly, but they are still planning variances – it is a separate role from running the operations properly.
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