Question

Which of the following could the mix of employees working have an impact on? Please explain.

		Direct Labor Price Variance
		Direct materials Efficiency Variance
		Direct Labor efficiency variance
		Direct Materials Price Variance

Answer 1

Mix of employees working have a impact on direct labour price variance .

The labour rate variance measure the difference between the expected and actual cost of labour. It is calculated as the difference between the actual labour rate pain and the standard rate , multipled by the number of actual working hours the formula is:

labour rate variance = (actual rate - standard rate ) * actual hours worked

An unfavourable variance means that the cost of labour was more expensive than anticipated, while the favourable variance indicates that the cost of labour was less expensive than planned.

This info can be used for planning purposes in development of future budgets , as well as a feedback loop to those employees who are responsible for the direct labour component of the business.