Favorable Labour efficiency Variance Formula

Favorable Labour efficiency Variance Formula

Favorable Labour efficiency variance would result in, when actual hours taken by labour are less than standard hour. This efficiency is measured in standard rate of labour.

Actual Hours < Standard hour = Favorable Labour Variance

Labour Efficiency Variance = (Standard Hours- Actual Hours) x (Standard Rate)

Example

Unit to be produced = 700

Standard Rate of Labour per hour= $ 7

Labour required for one unit = 4

Actual hour taken was 2500 Hours

Calculate Labour Efficiency Variance

Solution

Standard Hours = 700 x 4 = 2800 hours

Labour Efficiency Variance = (Standard hours –Actual Hours) x (Standard Rate)

= (2800-2500) x 7

=300 x 7

= 2,100 $ (Favorable)