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Barberry Limited had the following variances for March: Labour rate variance $ 800 F Labour efficiency...

Barberry Limited had the following variances for March: Labour rate variance $ 800 F Labour efficiency variance $2,400 U In the past, Barberry employed 10 people in production. They included 6 senior workers and 4 assistants. In March, the company experimented with 5 senior workers and 5 assistants. Required: Answer both of the following questions in the box provided. a) Would you recommend that the change be continued? Why or why not? b) What impact could the change in labour mix have on Barberry’s material quantity variance?

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Answer #1

a) Would you recommend that the change be continued? Why or why not?

No, I would not recommend that the change should be continued because although it resulted in favourable Labour rate variance but it also gave unfavourable Labour efficiency variance resulting in total unfavourable labour cost variance ( 800 - 2400 ) $ 1600.

Replacing skilled and senior workers with assistants resulted in more cost for the organisation.

b) What impact could the change in labour mix have on Barberry’s material quantity variance?

The impact can be unfavourable material quantity variance as there will be more wastage of materials now and lack of proper utilisation of materials.

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