Labour Mix or Gang Composition Variance arises due to change in the actual gang composition than the standard gang composition. This variance shows to the management how much labour cost variance is due to the change in labour composition.
It may be calculated in as follows:
When standard and actual times of the labour mix are the same. In this case, the variance is calculated as follows:
Labour Mix Variance = Standard Cost of Standard Labour Mix – Standard Cost of Actual Labour Mix.
Due to the non-availability of one grade of labour, there may be a change in the standard labour mix, and then revised standard will be used for the standard mix. The formula will be
Labour Mix Variance = Standard cost of Revised Standard Labour Mix – Standard Cost of Actual Labour Mix.