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**Labor Variances****A. Formula Approach:**

i. Labor cost variance = (Standard time X Standard rate) - (Actual time X Actual rate)

Or, LCV = ST X SR - AT X AR

ii. Labor rate variance = Actual time X (Standard rate - Actual rate)

Or, LRV = AT X (SR- AR)

iii. Labor efficiency variance = Standard rate X (Standard time for actual output - Actual time)

Or, LEV = SR X (RST - AT)

iv. Labor Mix Variance = Standard rate X (Revised standard time - Actual time)

Or, LMV = SR X (RST - AT)

v. Labor Yield Variance = (Actual Yield - Standard Yield) X Standard cost per unit

Or, LYV = (AY - SY) X SC

vi. Labor Idle Time Variance (LITV) = Idle time X Standard rate.

**B. Tabular Approach**

The steps that should be followed for a tabular approach of calculating labor variances as as follows:

1. Calculate the standard time required for the actual output in case the standard output and the actual output are different.

Standard time required for actual output = (Standard time/Standard output level) X Actual output

2. Calculate the mix rate per unit in case more than one grade of employees are engaged:

__* Mix rate per unit of standard time at standard rate__

= Total cost of standard time at standard rate/ total standard time

*

__Mix rate per unit of actual time at actual rate__
= Total cost of actual time at actual rate/ Total actual time

*

__Mix rate per unit for actual time at standard rate__
= Total cost of actual time at standard rate/ standard output level

3. Develop the working table as follows:

Working Table:

__Code.........Time........Rate.......Result(Time X Rate).........Variances (U for negative and F for positive)__

A................S...........S......................................................LEV = result of code (A-B) = $ U/F

B................A...........S......................................................LRV = results of code(B-c) = $ U/F

C................A...........A.....................................................LCV = results of code (A-C) = $ U/F

Where, A,B,C refer to the code. Instead of these letters any other symbol can be used.

S = standard time of labor hours

A = actual rate of wages

U = unfavorable variance

F = favorable variance.

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