Managerial Accounting Labor Analysis 2.5

Question 1

Labor Analysis

List the variance analysis?

Answer 1

• Labor variance
• Employee turnover
• Fixed employee
• Semi variable employee
• Labor cost, largest cost

Question 2

What different Labor Variance Formulas?

Answer 2

Differences due to volume, rate and efficiency

• Volume Variance VV
• Rate Variance RV
• Efficiency Variance EV
• Rate-Time Variance R-TV

Question 3

What is the formula for Volume Variance?

Answer 3

VV = Budgeted Rate x (Budgeted Time – Allowable Time for Actual Output)

Question 4

What is the formula for Rate Variance?

Answer 4

RV = Budgeted Time x (Budgeted Rate – Actual Rate)

Question 5

What is the formula for Efficiency Variance?

Answer 5

EV = Budgeted Rate x (Allowable Time for Actual Output – Actual Time)

Question 6

What is the formula for Rate-Time Variance?

Answer 6

R-TV = (Budgeted Time – Actual Time) x (Budgeted Rate – Actual Rate)

Question 7

What is the Volume Variance of the Example?

Answer 7

VV = Budgeted Rate x (Budgeted Time – Allowable Time for Actual Output)

VV=$2.5 X (200-213.33)=($33.33) U

• Note: Actual Covers = 3,200 Budgeted Min = 4min
• 3,200x4=12,800 convert to hours =>12,800/60=213.33 hrs

Question 8

What is the Rate Variance of the Example?

Answer 8

• RV = Budgeted Time x (Budgeted Rate – Actual Rate)
• RV = 200 X ($2.5-$2.75)=(50)U

Question 9

What is the Efficiency Variance of the Example?

Answer 9

• EV = Budgeted Rate x (Allowable Time for Actual Output – Actual Time)
• EV=$2.5 X (213.33-266.67)=(133.35)U

Question 10

What is the Rate-Time Variance for the Example?

Answer 10

• R-TV = (Budgeted Time – Actual Time) x (Budgeted Rate – Actual Rate)
• R-TV = (200-266.67) x ($2.5-$2.75) = (16.67)U

Question 11

When the cost and volume variances(C-VV) differ? Then..

(i.e. one is favorable and the other unfavorable)

Answer 11

The C-VV will be favorable.

Question 12

When the cost and volume variances are the same?

(i.e. both unfavorable)

Answer 12

the C-VV will be unfavorable.