Direct labor rate variance is the difference between the standard rate of wages specified and the actual rate of wages paid. Labor rate variance is that portion of direct labor variance, which occurs due to the difference between standard rate of pay specified and actual rate paid.
Formula For The Calculation Of Labor Rate Variance (LRV)
Labor Rate Variance (LRV) = AT x (SR-AR)
Where,
AT = Actual Time
SR = Standard Rate
AR = Actual rate
If the actual rate is more than the standard rate, there will be an adverse or unfavorable variance and when the actual rate is less than the standard rate, the variance will be favorable.
Formula For The Calculation Of Labor Rate Variance (LRV)
Labor Rate Variance (LRV) = AT x (SR-AR)
Where,
AT = Actual Time
SR = Standard Rate
AR = Actual rate
If the actual rate is more than the standard rate, there will be an adverse or unfavorable variance and when the actual rate is less than the standard rate, the variance will be favorable.