Use the following data to calculate the variances in problems 11–13. The followi

Question

Use the following data to calculate the variances in problems 11–13.

The following information has been prepared for a home health agency:

                                                          Budget             Actual

            Wage Rate per Hour                          $16.00            $17.00

            Fixed Hours                                            320                 320

            Variable Hours per Relative

                  Value Unit (RVU)                             1.0                  1.1

            Relative Value Units (RVUs)             1,000              1,200

            Total Labor Hours                               1,320              1,640

            Labor Costs                                     $21,120          $27,880

            Cost per RVU                                    $21.12            $23.23

Budgeted costs at actual volume would be $25,344 ($21.12 × 1,200), and the total variance to be explained is $2,536 Unfavorable ($27,880 – $25,344). Be sure to specify whether the variance is favorable or unfavorable.

11. What is the amount of variance that is attributed to the change in labor productivity?

Explanation / Answer

Labor productivity variance:

= Standard hours×Standard rate- Actual hours×Standard rate

= 1,320×$16-1,640×$16

= $5,120 Unfavourable.

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