Direct Labour Variance
Direct Labour Rate Variance [DLRV]
Direct labor rate variance is equal to the difference between actual hourly rate and standard hourly rate multiplied by actual hours worked. This variance is also known as direct labor price variance.
Direct labor rate variance = (Actual hours worked × Actual rate) – (Actual hours worked × Standard rate)
Direct Labour Efficicency Variance [DLEV]
Like direct labor rate variance, this variance may be favorable or unfavorable. If workers manufacture a certain number of units in an amount of time that is less than the amount of time allowed by standards for that number of units, the variance is known as efficiency variance.
Direct labor efficiency variance = (Actual hours worked × Standard rate) – (Standard hours allowed × Standard rate)
- Efficiancy variance further divided in Mix and Yield variance Direct labour Yield Variance
The yield variance reveals the difference between the standard cost of actual labor (based on the actual labor mix times the average of the standard mix rates) and the standard cost of the standard mix of labor.
Labor yield variance =(Standard hours – Actual hours) × (standard price of the standard mix
- Labour Mix Variance
The labor mix variance shows the difference between total costs for the actual number of hours used in labor classifications and the cost of the standard proportions designated for these labor types.
Labor mix variance =Actual hours × (standard price of the standard mix – standard price of the actual mix)