Advanced: Labour mix and yield variances A large manufacturing company with a diverse range of products is developing the use of standard costing throughout its divisions. A full standard costing system has already been implemented in Division A, including the use of mix and yield material variances, and attention has now turned to Division B where the main problem concerns labour. Division B makes highly complex work stations which incorporate material handling, automatic controls and robotics. Manufacture is a team effort and the team specified for work station No. 26 comprises:

Output is measured in standard hours and 90 standard hours are expected for every 100 clock hours. During a period the following data were recorded:

1650 standard hours were produced.
The factory director of Division B is anxious to gain the maximum information possible from the standard costing system. He sees no reason why the normal labour efficiency variance could not be divided into sub-variances in order to show separ¬ ately the effects of non-standard team composition and team productivity in a similar fashion to the material usage variance which can be sub-divided into mix and yield variances.
You are required

(a) to calculate the labour rate variance;
(3 marks)

(b) to calculate (i) the team composition variance, (ii) the team productivity variance and (iii) labour efficiency variance; (11 marks)

(c) to comment on the meaning of the variances calculated in

(b) and their weaknesses.

Transcribed Image Text:

2 supervisors paid 8 per hour 10 fitters paid 6 per hour 6 electricians paid 6 per hour 2 electronics engineers paid 7 per hour 4 labourers paid 4 per hour