Concept explainers
Concept Introduction:
Labor Cost Variance: The difference between the
- Actual man hour rate varies from the standard man hour rate and/or
- Actual efficiency of labor employed varies from the standard efficiency.
Therefore, Labor Cost Variance is the sum of (i) Labor Rate Variance and (ii) Labor Efficiency Variance.
Labor Rate Variance:
The difference between the actual rate of per man hour and the standard rate of per man hour is the Labor Price Variance.
Labor Efficiency Variance:
The difference between actual man hours and standard man hours is the Labor Efficiency Variance.
The following formulas are used to calculate Labor Cost Variance:
Labor Cost Variance (LCV) = Labor Rate Variance (LRV) + Labor efficiency variance (LEV)
Also, LCV= Standard Cost −Actual Cost of labor
Labor Rate Variance = Standard labor cost for actual hours- Actual labor cost
Labor Efficiency Variance = Standard cost of standard man hours required for actual production units- Standard cost of actual man hours worked.
Labor Cost Variance gives a view of deviations from the set standards which can be either favorable or unfavorable.
Direct Labour rate and Efficiency Variance

Want to see the full answer?
Check out a sample textbook solution
Chapter 23 Solutions
FUND OF ACCT PRIN(LOOSE-LEAF)+ACCESS
- Solve this Accounting Problemarrow_forwardCalculate the number of units that Danico Industries must sell in order to realize an operating income of $225,000 when fixed costs are $540,000 and the unit contribution margin is $30. a. 25,500 units b. 25,000 units c. 24,500 units d. 26,000 unitsarrow_forwardVariable costing includes what? (a) All production costs (b) Only variable manufacturing costs (c) Only fixed costs (d) Only period costs MCQarrow_forward
- Can you provide the accurate answer to this financial accounting question using correct methods?arrow_forwardA new product, an automated pancake machine, is being introduced at KFC Manufacturing. At a selling price of $68 per unit, management projects sales of 92,000 units. Launching the pancake machine would require an investment of $750,000. The desired return on investment is 12%. What is the target cost per pancake machine?arrow_forwardWhat is the balance of current liabilitiesarrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education





