Labour Efficiency Calculation

[Houses4Rent]

Oh ok. The more accurate formula, that takes account of any stratification, is (Actual Time x Standard Rate) - (Standard Time X Standard Rate)
So, if I understand the data correctly, it is:
(18 x 108 x 750) - (17 x 114 x 750) = 4,500 unfavourable
Actual rate is ignored because it is an efficiency variance that is being determined.

Clive, you missed the R850 and you need to turn it around, i.e.
(17 x 114 x 750) - (18 x 108 x 850)

[speed_demon]

Oh ok. The more accurate formula, that takes account of any stratification, is (Actual Time x Standard Rate) - (Standard Time X Standard Rate)
So, if I understand the data correctly, it is:
(18 x 108 x 750) - (17 x 114 x 750) = 4,500 unfavourable

Actual rate is ignored because it is an efficiency variance that is being determined.

This is my logic too. My main issue was how to incorporate the change in employee counts.

[CLIVE-TRIANGLE]

Houses, it is a specific measurement of direct labour efficiency. You compare the standard hours that it should have taken to produce, to the actual hours it took, and multiply the difference in hours by the standard cost per direct labor hour.

If you start mixing standard and actual rates you corrupt the measurement.

[Houses4Rent]

I am not with you. Efficiency is always a percentage.

>multiply the difference in hours by the standard cost per direct labor hour
That would be a Rand amount, not a percentage

[CLIVE-TRIANGLE]

It's a classical cost accounting formula.

The variance account for any period will have a balance. The balance consists of mainly two components, one of which is efficiency; the other is mostly rate.

So, if you subtract the efficiency variance, you are left with a balance that points to a mainly rate problem, either too high or too low.

Here is a decent explanation

[Houses4Rent]

Seems all to be an accounting issue/function. In that case I stay out of it as I suck at it.