All of our workers are under labor contracts. That means our labor rate variance must be zero.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
All of our workers are under labor contracts. That means our labor rate variance must be zero.
Labor rate variance:
Labor rate variance usually indicates the extents to which the hourly wages rate that are contributed to deviations from standard costs. Labor rate variance is a part of a total labor variance which is caused due to the difference in the standard hourly rate and the actual.
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