Breedons Ltd use standard costing and variance analysis in order to control their costs. At...
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Accounting
Breedons Ltd use standard costing and variance analysis in order to control their costs. At the end of December 2022, they calculated the labour variances to be:
Labour rate variance £90A
Labour efficiency variance £240A
During December 300 units were produced taking 180 hours at a cost of £1,530. The standard time per unit was 0.50 hours at a standard rate of £8 per hour.
Due to the variances being adverse, further investigation was undertaken to determine the causes and it was identified that the standard time per unit had been set assuming skilled workers would be used. Breedons were using semi-skilled workers who worked slower and consequently the standard hours should be increased by 15%.
Required:
Calculate the planning and operational variances in relation to labour efficiency.
Prove your calculation is correct and identify which of your calculated variances is controllable.
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