Calculation of labour turnover and efficiency ratio X Ltd has an average of 42 workers employed in one of its factories in a period during which 7 workers left and were replaced. The company pays a basic rate of £4.60 per hour to all its direct personnel. This is used as the standard rate. In addition, a factory-wide bonus scheme is in operation. A bonus of half of the efficiency ratio in excess of 100% is added as a percentage to the basic hourly rate, e.g. if the efficiency ratio is 110% then the hourly rate is

£4.83 (i.e. £4.60 + (£4.60 x 5%)).

During the period 114268 units of the company’s single product were manufactured in 4900 hours. The standard hour is 22 units.

Required:

(a) Calculate the labour turnover percentage for the period. (3 marks)

(b) Identify the reasons for, and costs of, labour turnover, and discuss how it may be reduced.
(12 marks)

(c) Calculate the hourly wage rate paid for the period, and the total labour variance.LO1