A diversified executive with over 20 years of experience across different industries, Mark LaBere, is a crucial member of several executive management teams. He helps companies implement and refine financial strategies to optimize production and increase process efficiency through cost accounting, cash flow projections, and variance analysis. With the latter, one of the subcategories Mark LaBere provides services on is labor variance.
Alongside material usage costs in production companies, labor variance offers a critical variable to evaluate processes and increase output efficiency. The variance compares the used input hours and the labor rate with the standard or anticipated numbers for informed decisions and encompasses efficiency and rate approaches. Efficiency variance compares the amount of time used in a process or task with the anticipated duration multiplied by the labor rate. For example, if the standard time to make a shoe, all factors held constant, is three hours, but a member of staff takes four hours or more, then there is a variance. Over time, the extra time significantly affects the total output. The management or industry engineers thus re-evaluate the existing processes such as simplified design, automation or workflow alteration, and skill levels change. After considering all the variables, the anticipated duration is altered to suit the prevailing condition and enable better efficient reflection on the records. On the other hand, the labor rate compares the actual and expected labor cost in the total hours worked. A negative variance implies the labor cost is more than anticipated numbers and thus requires reevaluation of the budget or feedback to the relevant employees. Conversely, positive result sets a benchmark to reward employees. Common causes of unfavorable rate variance range from pay premiums, such as overtime, incorrect labor standards, staffing skills differences to changes in costs of benefits such as the presence of casual and temporary workers.
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AuthorMark LaBere - Construction Industry Executive in Bismarck. Archives
December 2021
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