Labour Rate Variance Solution

STEP 0: Pre-Calculation Summary
Formula Used
Labour Rate Variance = Actual Time*(Standard Rate-Actual Rate)*Variance
LR = AT*(SR-ART)*V
This formula uses 5 Variables
Variables Used
Labour Rate Variance - Labour Rate Variance occurs when labour is paid at a rate that differs from the standard wage rate.
Actual Time - Actual Time refers to the time taken to produce an item on a production line versus the planned production time.
Standard Rate - Standard Rate refers to the amount paid per hour for work, often determined by industry standards or local laws.
Actual Rate - Actual Rate refers to the real or current rate at which items are measured.
Variance - Variance refers to the difference or deviation between an actual outcome or result and an expected or planned outcome.
STEP 1: Convert Input(s) to Base Unit
Actual Time: 4 --> No Conversion Required
Standard Rate: 140 --> No Conversion Required
Actual Rate: 75 --> No Conversion Required
Variance: 15 --> No Conversion Required
STEP 2: Evaluate Formula
Substituting Input Values in Formula
LR = AT*(SR-ART)*V --> 4*(140-75)*15
Evaluating ... ...
LR = 3900
STEP 3: Convert Result to Output's Unit
3900 --> No Conversion Required
FINAL ANSWER
3900 <-- Labour Rate 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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Labour Rate Variance Formula

Labour Rate Variance = Actual Time*(Standard Rate-Actual Rate)*Variance
LR = AT*(SR-ART)*V

What is Labour Rate Variance ?

Labour rate variance is a concept used in managerial accounting and cost accounting to analyze the difference between the actual labour rate paid to employees and the standard labour rate that was expected or budgeted for a given period. It helps assess how efficiently labour costs are being managed within an organization. Actual Labour Rate refers to the actual cost per unit of labor paid by the organization during a specific period. It includes wages or salaries, as well as any additional labour-related costs such as benefits, overtime, or bonuses. Labor rate 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 labor utilization. A negative variance, on the other hand, may indicate higher-than-expected wage rates, increased overtime, or inefficiencies in labour management.

How to Calculate Labour Rate Variance?

Labour Rate Variance calculator uses Labour Rate Variance = Actual Time*(Standard Rate-Actual Rate)*Variance to calculate the Labour Rate Variance, Labour Rate Variance measures the difference between the actual labor rate and the standard labor rate. Labour Rate Variance is denoted by LR symbol.

How to calculate Labour Rate Variance using this online calculator? To use this online calculator for Labour Rate Variance, enter Actual Time (AT), Standard Rate (SR), Actual Rate (ART) & Variance (V) and hit the calculate button. Here is how the Labour Rate Variance calculation can be explained with given input values -> 3900 = 4*(140-75)*15.

FAQ

What is Labour Rate Variance?
Labour Rate Variance measures the difference between the actual labor rate and the standard labor rate and is represented as LR = AT*(SR-ART)*V or Labour Rate Variance = Actual Time*(Standard Rate-Actual Rate)*Variance. Actual Time refers to the time taken to produce an item on a production line versus the planned production time, Standard Rate refers to the amount paid per hour for work, often determined by industry standards or local laws, Actual Rate refers to the real or current rate at which items are measured & Variance refers to the difference or deviation between an actual outcome or result and an expected or planned outcome.
How to calculate Labour Rate Variance?
Labour Rate Variance measures the difference between the actual labor rate and the standard labor rate is calculated using Labour Rate Variance = Actual Time*(Standard Rate-Actual Rate)*Variance. To calculate Labour Rate Variance, you need Actual Time (AT), Standard Rate (SR), Actual Rate (ART) & Variance (V). With our tool, you need to enter the respective value for Actual Time, Standard Rate, Actual Rate & Variance 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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