Labour Variances

Labour variances is the differences between standard labor costs and actual labor costs.

• These variances help businesses identify where labor costs are not aligning with expectations, controlling inefficiencies or cost savings.

It can be discussed as follows:

1. Labour Cost Variance (LCV)
2. Labour Rate Variance (LRV)
3. Labour Efficiency Variance (LEV)
   • Labour Idle Time Variance (LITV)
   • Labour Mix Variance (LMV)
   • Labour Yeild Variance (LYV)

1.) Labour Cost Variance

Labour Cost Variance is the difference between the standard labor cost and the actual labor cost for a given level of output.

• It shows whether the total labor cost was over or under budget.

2.) Labour Efficiency Variance

Labour Efficiency Variance is the difference between the standard hours expected and the actual hours spent, multiplied by standard rate.

• It highlights efficiency in using labor, showing if more or fewer hours were required than planned.

3.) Labour Rate Variance

Labour Rate Variance shows the difference between the standard wage rate and the actual wage rate paid, multiplied by Actual time.

• This variance reflects whether labor costs were higher or lower due to differences in wage rates.