Performance Management · Planning and operational variances

Labour Planning and Operational Variances in ACCA PM

Updated 11 October 2026 · Fact-checked

Labour planning variances compare the original standard with a revised, realistic standard. They are uncontrollable. Labour operational variances compare the revised standard with actual results. They are controllable. You calculate rate and efficiency each way, using revised standard hours and rates, and treat idle time separately at the revised rate.

Understand Labour Planning and Operational Variances

A standard is set before the period starts. Sometimes it turns out to be wrong. A pay rise may be agreed, or a new process may need more time. If you compare actual results with the old standard, the variances mix two things: a bad standard and poor performance.

Planning and operational variances separate them. You create a revised standard (also called the ex-post standard). It is the standard you would have set with perfect hindsight. The gap between the original and the revised standard is the planning variance. The gap between the revised standard and what actually happened is the operational variance.

Planning variances are usually not the manager's fault, so they are treated as uncontrollable. Operational variances reflect how well the department performed against a fair target, so the manager is held responsible for them.

For labour, you split both the rate variance and the efficiency variance this way. If idle time is recorded, the idle time variance is an operational variance and is valued at the revised standard rate. The planning and operational parts add up to the usual variance based on the original standard.

Key rules to remember

Labour rate planning variance: (Original standard rate − Revised standard rate) × Revised standard hours for actual output; Positive is favourable, negative is adverse. If the revised rate is higher, it is adverse.
Labour efficiency planning variance: (Original standard hours for actual output − Revised standard hours for actual output) × Original standard rate; Original rate is used because the rate change has already been picked up in the rate planning variance.
Labour rate operational variance: (Revised standard rate − Actual rate) × Actual hours paid; Actual rate = actual labour cost ÷ actual hours paid.
Labour efficiency operational variance: (Revised standard hours for actual output − Actual hours worked) × Revised standard rate; Use hours worked, not hours paid, when idle time is given.
Idle time variance: Idle hours × Revised standard rate (always adverse); Idle hours = hours paid − hours worked.
Check: Planning + Operational = Variance against the original standard; Use this to test your answer. Total labour variance = original standard cost of actual output − actual cost.

How to solve Labour Planning and Operational Variances questions

Follow the same order every time. Write the hours and rates down first, then calculate. This keeps the planning and operational parts consistent.

1Find the actual output. Work out the original standard hours for that output (output × original hours per unit).
2Work out the revised standard hours for that same actual output (output × revised hours per unit).
3Identify the original standard rate, the revised standard rate and the actual rate (actual cost ÷ actual hours paid).
4Note the hours paid and the hours worked. The difference is idle time.
5Calculate the two planning variances: rate on revised standard hours, efficiency on original rate.
6Calculate the operational variances: rate on hours paid, efficiency on hours worked at the revised rate, and idle time at the revised rate.
7Label each variance as favourable or adverse and total the planning and operational groups.
8Check that the total equals the variance against the original standard cost. Then comment on who is responsible, if asked.

Quickest way: Three-column cost grid

When to use it: Use it when the question gives a lot of data and you need to avoid sign or hour errors, especially in Section C.

Draw three lines: Original standard (original hours × original rate), Revised standard (revised hours × revised rate), Actual (hours × actual rate).
The difference between the first two lines is the total planning variance. The difference between the last two is the total operational variance.
Split planning with one step: change the rate on the revised hours (rate), then the hours at the original rate (efficiency).
Split operational with one step: rate on hours paid, then hours at the revised rate. Put idle time at the revised rate.
Add the parts and compare them with the line totals. If they do not agree, one hour figure is wrong.

Common mistakes in Labour Planning and Operational Variances

Using actual hours for the rate planning variance.
Students copy the normal rate variance, which uses actual hours.
Fix: Planning compares standards, so use the revised standard hours for actual output. Actual hours only appear in operational variances.
Using the revised rate in the efficiency planning variance.
Students assume revised figures are used everywhere.
Fix: Value the hours change at the original rate. The rate change is already in the rate planning variance.
Using the original standard rate in the operational efficiency variance.
Habit from the basic efficiency variance.
Fix: Operational variances start from the revised standard. Use the revised rate.
Valuing idle time at the actual rate, or not separating it.
Students forget that the efficiency variance uses hours worked.
Fix: Idle hours × revised standard rate, shown as adverse. Use hours worked in the efficiency variance.
Flexing the revised hours to the wrong output.
Students use budgeted output instead of actual output.
Fix: Both the original and revised standard hours must be for the actual output produced.
Getting the signs wrong when the revised standard is higher.
Students think a revised higher cost is a good thing.
Fix: If the revised standard cost is higher than the original, the planning variance is adverse. Compare the revised standard to what you expected to pay.

Worked examples

Example 1

A company makes 2,000 units. The original standard is 3 labour hours per unit at $12 per hour. After a wage agreement and a change in method, the revised standard is 3.3 hours per unit at $13 per hour. Actual hours paid and worked were 6,900 and the actual labour cost was $91,080. Calculate the labour planning and operational rate and efficiency variances.

Show the solution

Original standard hours = 2,000 × 3 = 6,000. Revised standard hours = 2,000 × 3.3 = 6,600.
Actual rate = $91,080 ÷ 6,900 = $13.20 per hour.
Rate planning = ($12 − $13) × 6,600 = $6,600 adverse.
Efficiency planning = (6,000 − 6,600) × $12 = $7,200 adverse. Total planning = $13,800 adverse.
Rate operational = ($13 − $13.20) × 6,900 = $1,380 adverse.
Efficiency operational = (6,600 − 6,900) × $13 = $3,900 adverse. Total operational = $5,280 adverse.
Check: original standard cost = 6,000 × $12 = $72,000. Actual cost = $91,080. Total variance = $19,080 adverse = $13,800 + $5,280.

Answer: Rate planning $6,600 A; efficiency planning $7,200 A; rate operational $1,380 A; efficiency operational $3,900 A. Total $19,080 adverse.

Example 2

A company makes 1,500 units. The original standard is 2 hours per unit at $10 per hour. The revised standard is 2.1 hours per unit at $11 per hour. Hours paid were 3,300, of which 200 were idle. Actual labour cost was $37,290. Calculate all planning and operational labour variances, including idle time.

Show the solution

Original standard hours = 1,500 × 2 = 3,000. Revised standard hours = 1,500 × 2.1 = 3,150. Hours worked = 3,300 − 200 = 3,100.
Actual rate = $37,290 ÷ 3,300 = $11.30 per hour.
Rate planning = ($10 − $11) × 3,150 = $3,150 adverse.
Efficiency planning = (3,000 − 3,150) × $10 = $1,500 adverse. Total planning = $4,650 adverse.
Rate operational = ($11 − $11.30) × 3,300 = $990 adverse.
Idle time = 200 × $11 = $2,200 adverse.
Efficiency operational = (3,150 − 3,100) × $11 = $550 favourable. Total operational = $990 + $2,200 − $550 = $2,640 adverse.
Check: original standard cost = 3,000 × $10 = $30,000. Actual cost = $37,290. Variance = $7,290 adverse = $4,650 + $2,640.

Answer: Rate planning $3,150 A; efficiency planning $1,500 A; rate operational $990 A; idle time $2,200 A; efficiency operational $550 F. Total $7,290 adverse.

Exam tips

In an objective test, find the output and both sets of standard hours first. Most wrong answers come from the wrong hours.
Read the question for the words revised, ex-post or realistic. They tell you a planning split is needed.
In Section C, show each variance with its working and mark A or F. Marks are given for method even if one figure is wrong.
When asked to comment, say planning variances are generally uncontrollable and operational variances are controllable. Add one specific cause from the scenario.
Always do the reconciliation check. It takes a minute and catches most errors.

Practice questions from Planning and operational variances

Labour Planning and Operational Variances in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Labour Planning and Operational Variances: frequently asked questions

What is the difference between planning and operational labour variances?

A planning variance is the difference between the original and the revised standard. It shows the standard was unrealistic. An operational variance is the difference between the revised standard and actual results. It shows how well the department performed.

Why is the revised standard rate used in the operational efficiency variance?

The operational variances measure performance against a fair, up-to-date standard. Using the revised rate keeps the effect of the rate change out of the efficiency measure and in the planning variance.

How do you treat idle time in planning and operational variances?

Idle time is an operational variance. Multiply idle hours by the revised standard rate. It is adverse. The operational efficiency variance then uses hours worked.

Are labour planning variances always adverse?

No. They are adverse if the revised standard cost is higher than the original, and favourable if it is lower. For example, a revised standard that needs fewer hours gives a favourable efficiency planning variance.