Labour Efficiency Variance Formula

Labour Efficiency Variance Formula

Labour efficiency variance is calculated to show the labour performance. The difference between standard hour & actual hours is measured at standard rate. Labour efficiency ratio may be favorable or unfavorable. Labour efficiency variance can be calculated by the following formula

Actual > Standard hour = unfavorable Labour Variance

Actual Hours < Standard hour = Favorable Labour Variance

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

Example

 Table to be produced = 600

Standard Labour hour rate per table is= $ 6

Standard Labour hour needed per Table = 4 Hr

Actual hour taken was 1800 Hours

Calculate Labour Efficiency Variance

Solution

Standard Hours = 600 x 4 = 2400 hours

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

= (2400-1800) x 6

=(600 x6)

= 3600 (Favorable Variance)