BUDGETARY CONTROL 233
Table 15.8 Materials usage variance
Plastic
Standard quantity 9 , 000 × 2
Standard price @ £1.50 27,000Actual quantity 19,000
Standard price @ £1.50 28,500Adverse variance −1,500
Metal
Standard quantity 9 , 000 × 1
Standard price @ £2.00 18,000Actual quantity 10,000
Standard price @ £2.00 20,000Adverse variance −2,000
Wood
Standard quantity 9 , 000 × 4
Standard price @ £0.75 27,000Actual quantity 38,000
Standard price @ £0.75 28,500Adverse variance −1,500
Total usage variance – adverse −5,000£1,000 price), which needs to be investigated as a matter of priority – while there
may be a trade-off between the price and usage variances for plastic and wood,
as sometimes quality and price can conflict with each other. The total materials
variance is shown in Table 15.10.
Similarly, we need to analyse the usage and price variances for both skilled and
semi-skilled labour.
Labour variance
The total labour variance is an unfavourable £21,250, as shown in Table 15.11.
Similarly, we need to look at the usage variance (which is a productivity or
efficiency measure) and the price variance (which is a wage rate variance) for each
of the two types of labour.
Labour efficiency variance
Using the same formula, the efficiency variance for labour is shown in Table 15.12.
The adverse variance is a result of 1,000 additional hours being worked for skilled
labour and 1,000 hours less being worked by unskilled labour. This may have been
the result of: