Labour Cost Variance Solution

STEP 0: Pre-Calculation Summary
Formula Used
Labour Cost Variance = (Standard Hours for Actual Output*Standard Rate)-(Actual Hours*Actual Rate)
LCV = (SO*SR)-(ATH*ART)
This formula uses 5 Variables
Variables Used
Labour Cost Variance - Labour Cost Variance is the difference between the expected cost of labour and the actual cost of labour.
Standard Hours for Actual Output - Standard Hours for Actual Output is a measure to assess the efficiency of labour utilization to the actual production achieved.
Standard Rate - Standard Rate refers to the amount paid per hour for work, often determined by industry standards or local laws.
Actual Hours - Actual Hours refers to the total number of hours worked by labour in a specific period, such as a day, week, month, or accounting period.
Actual Rate - Actual Rate refers to the real or current rate at which items are measured.
STEP 1: Convert Input(s) to Base Unit
Standard Hours for Actual Output: 6 --> No Conversion Required
Standard Rate: 140 --> No Conversion Required
Actual Hours: 5 --> No Conversion Required
Actual Rate: 75 --> No Conversion Required
STEP 2: Evaluate Formula
Substituting Input Values in Formula
LCV = (SO*SR)-(ATH*ART) --> (6*140)-(5*75)
Evaluating ... ...
LCV = 465
STEP 3: Convert Result to Output's Unit
465 --> No Conversion Required
FINAL ANSWER
465 <-- Labour Cost Variance
(Calculation completed in 00.004 seconds)

Credits

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Created by Aashna
IGNOU (IGNOU), India
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Indian Institute of Technology, Indian School of mines, Dhanbad (IIT ISM Dhanbad), Dhanbad
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25 Cost Accounting Calculators

Material Cost Variance
​ Go Material Cost Variance = (Standard Quality for Actual Output*Standard Price)-(Actual Quantity*Actual Price)
Labour Cost Variance
​ Go Labour Cost Variance = (Standard Hours for Actual Output*Standard Rate)-(Actual Hours*Actual Rate)
Revised Standard Quantity
​ Go Revised Standard Quantity = (Standard Quantity of each Material/Total Standard Quantity)*Total Actual Quantity
Learning Curve
​ Go Learning Curve = (Time Taken to Produce Initial Quantity*Cumulative Number of Batches)^(-Learning Coefficient)
Labour Efficiency Variance
​ Go Labour Efficiency Variance = Standard Rate*(Standard Time-Actual Time)*Variance
Time to Receive
​ Go Time to Receive = Time for Stock Validation+Time to Add Stock to Records+Time to Prep Stock for Storage
Labour Rate Variance
​ Go Labour Rate Variance = Actual Time*(Standard Rate-Actual Rate)*Variance
Cycle Time
​ Go Cycle Time = Process Time+Inspection Time+Move Time+Queue Time
Revised Standard Hours of Labours
​ Go Revised Standard Hours of Labours = (Actual Mix/Standard Mix)*(Standard Hours of Labour)
Material Yield Variance
​ Go Material Yield Variance = (Actual Unit Usage-Standard Unit Usage)*Standard Cost per Unit
Overall Equipment Effectiveness
​ Go Overall Equipment Effectiveness = Good Count*Ideal Cycle Time/Planned Production Time
Avoided Cost
​ Go Avoided Costs = Assumed Repair Cost+Production Losses-Preventative Maintenance Cost
Material Usage Variance
​ Go Material Usage Variance = Standard Price*(Actual Quantity Units-Standard Quantity)
Labour Mix Variance
​ Go Labour Mix Variance = Standard Rate*(Reversed Standard Rate-Actual Time)
Material Price Variance
​ Go Material Price Variance = Actual Quantity*(Standard Price-Actual Price)
Material Quantity
​ Go Material Quantity = Standard Price*(Standard Quantity-Actual Quantity)
Customer Acquisition Cost
​ Go Customer Acquisition Cost = Cost of Sales and Marketing/Number of New Customers Acquired
Total Addressable Market
​ Go Total Addressable Market = Annual Contract Value per Client*Number of Potential Clients
First Pass Yield
​ Go First Pass Yield = Number of Good Products Finished/Number of Production Orders Started
Average Days Delinquent
​ Go Average Days Delinquent = Days Sales Outstanding-Best Possible Days Sales Outstanding
Backorder Rate
​ Go Backorder Rate = (Number of Undeliverable Orders/Total Number of Orders)
Monthly Recurring Revenue
​ Go Monthly Recurring Revenue = Number of Customers*Average Billed Amount
Sell -Through Rate
​ Go Sell Through Rate = Number of Units Sold/Number of Units Received
Takt Time
​ Go Takt Time = Production Available Time/Customer Demand
On-Time Delivery
​ Go On-Time Delivery = On Time Units/Total Units

16 Important Formulas of Cost Accounting Calculators

Labour Cost Variance
​ Go Labour Cost Variance = (Standard Hours for Actual Output*Standard Rate)-(Actual Hours*Actual Rate)
Learning Curve
​ Go Learning Curve = (Time Taken to Produce Initial Quantity*Cumulative Number of Batches)^(-Learning Coefficient)
Labour Efficiency Variance
​ Go Labour Efficiency Variance = Standard Rate*(Standard Time-Actual Time)*Variance
Overall Equipment Effectiveness
​ Go Overall Equipment Effectiveness = Good Count*Ideal Cycle Time/Planned Production Time
Cost of Goods Sold
​ Go Cost of Goods Sold = Beginning Inventory+Purchases During the Period-Ending Inventory
Material Usage Variance
​ Go Material Usage Variance = Standard Price*(Actual Quantity Units-Standard Quantity)
Noria Effect
​ Go Noria Effect = (New Hires Salary Cost-Leavers Salary Cost)/Previous Salary Cost
Customer Acquisition Cost
​ Go Customer Acquisition Cost = Cost of Sales and Marketing/Number of New Customers Acquired
Total Addressable Market
​ Go Total Addressable Market = Annual Contract Value per Client*Number of Potential Clients
Backorder Rate
​ Go Backorder Rate = (Number of Undeliverable Orders/Total Number of Orders)
Conversion Cost
​ Go Conversion Cost = Direct Labour Cost+Manufacturing Overhead Cost
Production Cost
​ Go Production Cost = Total Fixed Costs+Total Variable Costs
Prime Cost
​ Go Prime Cost = Direct Materials Cost+Direct Labour Cost
Takt Time
​ Go Takt Time = Production Available Time/Customer Demand
On-Time Delivery
​ Go On-Time Delivery = On Time Units/Total Units
Unit Cost
​ Go Unit Cost = Total Cost/Total Units Produced

Labour Cost Variance Formula

Labour Cost Variance = (Standard Hours for Actual Output*Standard Rate)-(Actual Hours*Actual Rate)
LCV = (SO*SR)-(ATH*ART)

What is Labour Cost Variance ?

Labour Cost Variance is a concept used in managerial accounting and cost accounting to evaluate the difference between the actual cost of labour incurred and the standard or budgeted cost of labour for a specific period. It helps assess how efficiently labour cost is managed within an organization. It indicates whether labour costs were higher or lower than expected due to changes in wage rates, overtime usage, labour efficiency, or other factors. Labour cost variance analysis helps management understand the factors contributing to deviations in labour costs and take appropriate actions to control expenses. A positive variance may result from factors such as lower-than-expected wage rates, reduced overtime, or efficient labour utilization. A negative variance, on the other hand, may indicate higher-than-expected wage rates, increased overtime, or inefficiencies in labour management. Identifying the root causes of labour cost variances enables management to implement strategies to optimize labour costs.

How to Calculate Labour Cost Variance?

Labour Cost Variance calculator uses Labour Cost Variance = (Standard Hours for Actual Output*Standard Rate)-(Actual Hours*Actual Rate) to calculate the Labour Cost Variance, Labour Cost Variance measures the difference between the actual labour cost and the standard labour cost. Labour Cost Variance is denoted by LCV symbol.

How to calculate Labour Cost Variance using this online calculator? To use this online calculator for Labour Cost Variance, enter Standard Hours for Actual Output (SO), Standard Rate (SR), Actual Hours (ATH) & Actual Rate (ART) and hit the calculate button. Here is how the Labour Cost Variance calculation can be explained with given input values -> 465 = (6*140)-(5*75).

FAQ

What is Labour Cost Variance?
Labour Cost Variance measures the difference between the actual labour cost and the standard labour cost and is represented as LCV = (SO*SR)-(ATH*ART) or Labour Cost Variance = (Standard Hours for Actual Output*Standard Rate)-(Actual Hours*Actual Rate). Standard Hours for Actual Output is a measure to assess the efficiency of labour utilization to the actual production achieved, Standard Rate refers to the amount paid per hour for work, often determined by industry standards or local laws, Actual Hours refers to the total number of hours worked by labour in a specific period, such as a day, week, month, or accounting period & Actual Rate refers to the real or current rate at which items are measured.
How to calculate Labour Cost Variance?
Labour Cost Variance measures the difference between the actual labour cost and the standard labour cost is calculated using Labour Cost Variance = (Standard Hours for Actual Output*Standard Rate)-(Actual Hours*Actual Rate). To calculate Labour Cost Variance, you need Standard Hours for Actual Output (SO), Standard Rate (SR), Actual Hours (ATH) & Actual Rate (ART). With our tool, you need to enter the respective value for Standard Hours for Actual Output, Standard Rate, Actual Hours & Actual Rate and hit the calculate button. You can also select the units (if any) for Input(s) and the Output as well.
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