Help! ACCA Planning & Operational Variances for Labour Cost
Discussion
I find the planning and operational variances very quicky. I just barely understand the material planning and operational variances after watching related Opentuition lectures. But when it comes to labour ones, I am lost again, only this time Opentuition doesn't cover it at all.
So here it comes the scenario(I will skip the material question and only focus on the labours):
Below is a standard cost card extract from POV Ltd:
For the period, due to the material's unavailable situation, the company found an alternative one. 2500 units were budgeted to be produced and sold but the actual production and sales were 2850 units.
Weather conditions unexpectedly improved for the period with the result that a 50 cent per hour bad weather bonus, which had been allowed for in the original standard, did not have to be paid. Because of the difficulties expected with the alternative material, management agreed to pay the workers $8 per hour for the period only. During the period 18800 hours were paid for.
Please calculate the planning and operational variances for labour cost.
Text solution:
Labour rate for planning variances
Labour rate for operational variances
I just don't understand the solution.
The theory in the textbook is something like this:
And I just get frustrated.
I mean where do these Weather bonus and Alternative material difficulties come from? Shouldn't they rather be rate variance and efficiency variance?
Also why rate variance is zero in operational variance? Could someone please help me out?
Big thanks in advance!
So here it comes the scenario(I will skip the material question and only focus on the labours):
Below is a standard cost card extract from POV Ltd:
For the period, due to the material's unavailable situation, the company found an alternative one. 2500 units were budgeted to be produced and sold but the actual production and sales were 2850 units.
Weather conditions unexpectedly improved for the period with the result that a 50 cent per hour bad weather bonus, which had been allowed for in the original standard, did not have to be paid. Because of the difficulties expected with the alternative material, management agreed to pay the workers $8 per hour for the period only. During the period 18800 hours were paid for.
Please calculate the planning and operational variances for labour cost.
Text solution:
Labour rate for planning variances
Labour rate for operational variances
I just don't understand the solution.
The theory in the textbook is something like this:And I just get frustrated.
I mean where do these Weather bonus and Alternative material difficulties come from? Shouldn't they rather be rate variance and efficiency variance?
Also why rate variance is zero in operational variance? Could someone please help me out?
Big thanks in advance!
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