Labour mix variance

Labour mix variance measures the cost effect of using a different proportion of labour grades, such as skilled versus unskilled, than standard, for the actual total hours actually worked.

ByHoang TruongUpdated July 5, 2026

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For 5,200 total hours, the standard 40/60 mix calls for 2,080 skilled and 3,120 unskilled hours. The workforce actually worked 2,400 skilled and 2,800 unskilled hours instead. Valued at standard rates, leaning on the pricier skilled grade produces a net €3,200 adverse mix variance.

Where it fits

SubjectManagerial AccountingAdvancedTopicStandard Costing & Variance AnalysisAdvanced

The formula

LaTeX

LMV = \sum_{g} \left(H_{mix,g} - H_{actual,g}\right) \times R_{std,g}

Variables

$L M V$: Labour mix variance (total across grades) (€)
$H_{mi x, g}$: Standard-mix hours for grade g, i.e. actual total hours × standard proportion for grade g (hours)
$H_{a c t u a l, g}$: Actual hours worked for grade g (hours)
$R_{s t d, g}$: Standard rate per hour for grade g (€ per hour)

Compares the standard proportion of each labour grade against the mix actually used, for the same total hours worked, valued at standard rates.