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Q) A business advisor had planned to use 3 hours of labour on 700 client services in june.Labour is paid $40 per hour
In june there were actually 900 services provided. total labour hrs were 3240 and the actual lbr hr was $42 per hr
the advisor has since discovered that due to a change in legislation that meant extra client responsibilities the budget should have provided for 3.5 hrs of lbr per service.what is planning labour efficiency variance for june?
Ans is $18000discrepancy is why are we multiplying 3 by 900 for standard hrs (which is actual services not standard services set)
my answer is $14000 by $40 x (2450 – 2100)
This is not mix and yield 🙂
For cost variances we always compare the actual costs with the standard cost of the actual production (which in this case is the number of actual services, rather than units). We do not compare with the original budget production (or in this case services).
Do watch my free lectures on variances. The lectures are a complete free course for Paper PM and cover everything needed to be able to pass the exam well.
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