Direct labor cost variance is the difference between the standard direct labor cost for the actual output and the actual labor cost paid. Labor cost variance can be defined as the deviation of the actual direct wages paid from the direct wages specified for the standard output.
Formula for calculation of labor cost variance (LCV)
LCV = (ST x SR) - ( AT x AR)
Where,
LCV = Labor cost variance
ST = Standard time
SR = Standard rate
AT = Actual time
AR = Actual rate
Labor cost variance represents the total of the labor rate variance and the labor efficiency variance.
Therefore, LCV = Labor rate variance (LRV) + Labor efficiency variance LEV)
If the resulting figure is positive, the difference is denoted by F i.e. favorable variance and if the resulting figure is negative, the difference is denoted by U i.e. unfavorable variance.
Formula for calculation of labor cost variance (LCV)
LCV = (ST x SR) - ( AT x AR)
Where,
LCV = Labor cost variance
ST = Standard time
SR = Standard rate
AT = Actual time
AR = Actual rate
Labor cost variance represents the total of the labor rate variance and the labor efficiency variance.
Therefore, LCV = Labor rate variance (LRV) + Labor efficiency variance LEV)
If the resulting figure is positive, the difference is denoted by F i.e. favorable variance and if the resulting figure is negative, the difference is denoted by U i.e. unfavorable variance.
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