The following labor standards have been established for a particular product: Standard labor-hours per unit of output 8.6 hours Standard labor rate $ 15.50 per hour The following data pertain to operations concerning the product for the last month: Actual hours worked 8,500 hours Actual total labor cost $ 129,200 Actual output 840 units What is the labor rate variance for the month
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.
The following labor standards have been established for a particular product:
| Standard labor-hours per unit of output | 8.6 | hours | |
| Standard labor rate | $ | 15.50 | per hour |
The following data pertain to operations concerning the product for the last month:
| Actual hours worked | 8,500 | hours | |
| Actual total labor cost | $ | 129,200 | |
| Actual output | 840 | units | |
What is the labor rate variance for the month?
Labor Rate Variance:-It means variance which occurs when there is a difference between the actual and the expected cost of labor. The formula for the same is:-
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