Component |
Description |
Standard Hours |
The number of hours that should have been worked for the actual production level. |
Actual Hours |
The number of hours actually worked. |
Standard Rate |
The predetermined rate per hour. |
Labor Efficiency Variance |
The difference between the standard labor hours and actual labor hours, multiplied by the standard rate. |
Formula |
Labor Efficiency Variance = (Standard Hours – Actual Hours) × Standard Rate |
Purpose |
Used to measure the efficiency of labor usage in production, helping to identify areas for improvement. |