Favorable Labour Rate Variance Formula
In labour rate variance
would be favorable, if actual cost is lower than standard cost. in other word
favorable variance would result in , when actual labour rate is lower than
standard labour rate.
Actual Cost < Standard
Cost = Favorable Labour rate Variance
Actual Quantity x
(Standard Rate-Actual Rate)
Example
Actual
Labour Hr Spent = 2000
Unit
produced during period = 600 units
Standard
Labour per unit = 7 hr
Standard
Rate = $22
Labour
Cost = 40,000
Calculate
Labour rate Variance
Solution
Actual
Cost = 40,000/2000=20
Actual
Quantity x (Standard Rate-Actual Rate)
=
2000 x (22-20)
=
2000 x 2
= 4000 (favorable)
