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Labor Mix Variance

>> July 1, 2011

Labor mix variance is just like material mix variance and it is the part of labor efficiency variance. If you would see any factory, you would see different type of workers. Workers may be skilled, semi skilled and unskilled. Company cost accountant has to make standard quantity of all these type of laborers  but actual quantity may also be dependent on the supply of workers. Suppose, we make standard of skilled workers as 40 but actual supply was of that type worker 30, so we had to appoint semi skilled workers. Due to this, there will happen labor mix variance. There are following main basis of calculating labor mix variance:

1st : If actual composition of laborers is equal to standard composition of laborers

Formula of LMV = Standard Cost of Standard Mix of Laborers - Standard Cost of Actual Mix of Laborers

2nd : If actual composition of laborers is not equal to standard composition of laborers

Formula of LMV = Total Nos. of Actual labor composition/ total Nos. of standard labor composition X standard cost of revised composition - standard cost of actual composition

3rd If we change standard time composition and then actual time is different from standard time

Formula of LMV = Total Nos. of actual labor composition/ total nos. of revised std. labor composition X std. cost of revised std. composition - std. cost of actual composition

Related : Labor Efficiency Variance

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