7/30/2019 104761624 Direct Labor Variance Example

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Total Direct Labor Variance

1 Hours Rate Total Hours Rate Total Hours Rate TotalDL hours used in productionDepartment A 98,832 10.86$ 1,073,316$ 98,832 11.07$ 1,094,070$ 100,117 11.07$ 1,108,295$Department B 87,377 14.38 1,256,481 87,377 14.35 1,253,860 80,603 14.35 1,156,653Department C 50,379 18.09 911,363 50,379 18.44 928,996 53,384 18.44 984,408

Total 236,588 3,241,160$ 3,276,926$ 234,104 3,249,357$

Variance analysisDepartment A (20,755) (14,225) (34,980)Department B 2,621 97,207 99,828Department C (17,633) (55,412) (73,045)

Total (35,766)$ 27,570$ (8,196)$ Negative variances are favorable, costs were less than planned

DL Efficienc Variance 5 5Actual Total Actual Bud eted Actual Total Bud eted Bud eted Bud eted Bud eted Bud eted

Hours Mix Rate Total Hours Mix Rate Total Total Hours Mix Rate TotalDL hours used in productionDepartment A 236,588 41.8% 11.07$ 1,094,070$ 236,588 42.8% 11.07$ 1,120,055$ 234,104 42.8% 11.07$ 1,108,295$Department B 236,588 36.9% 14.35 1,253,860 236,588 34.4% 14.35 1,168,926 234,104 34.4% 14.35 1,156,653Department C 236,588 21.3% 18.44 928,996 236,588 22.8% 18.44 994,854 234,104 22.8% 18.44 984,408

Total 3,276,926$ 3,283,834$ 3,249,357$

Variance analysis

Department A (25,985)$ 11,760$ (14,225)$Department B 84,934 12,273 97,207Department C (65,857) 10,445 (55,412)

Total (6,908)$ 34,478$ 27,570$ Negative variances are favorable, costs were less than planned

ITEM TO CHART: Department A Dropdown menu

Notes:

1 Note that the DL variances focus on hours used in production. Contrast this with the flexible budget, which focused total hours.2 The DL Rate Variance measures the effect on Total DL Variance due to differences in budgeted and actual DL hourly rates.3 The DL Efficiency Variance measures the effect on Total DL Variance due to differences in budgeted and actual individual department hours.4 Equals "Static Budget" - "Actual Results" OR "DL Rate Variance" + "DL Efficiency Variance"5 Mix = individual department hours / total hours.6 The DL Mix Variance measures the effect on the DL Efficiency Variance due to differences in the budgeted and actual mix of hours.7 The DL Yield Variance measures the effect on the DL Efficiency Variance due to differences in budgeted and actual total hours.8 DL Mix Variance + DL Yield Variance

DL Efficiency VarianceDL Yield Variance7

DL Mix Variance6

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WHITE CELLS ARE ADJUSTABLE

Direct Labor Variance Example

Actual Results Flexible Budget Static Budget

DL Rate Variance DL Efficiency Variance Total DL Variance

Kristoffer Burnett - Certified Management Accountant, 2009-2011Small business solutions at http://www.imperoco.com

($40,000)

($35,000)

($30,000)

($25,000)

($20,000)

($15,000)

($10,000)

($5,000)

$0

Department A

Total DL Variance Breakdown

DL Rate Variance DL Efficiency Variance Total DL Variance

($25,985)

$11,760

DL Efficiency Variance Breakdown

DL Mix Variance DL Yield Variance

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