How is Labor Rate Variance calculated?
A(Actual Hours Worked − Standard Hours) × Standard Rate
B(Actual Rate Paid − Standard Rate) × Actual Hours Worked
C(Actual Rate Paid − Standard Rate) × Standard Hours
DTotal Overhead ÷ Actual Labor Hours
Explanation
Core Concept: Direct Labor Rate Variance = (Actual Rate − Standard Rate) × Actual Hours Worked. It measures the difference between actual pay rate and standard hourly rate for hours actually worked. Context/Distractors: Option A represents Labor Efficiency Variance. Multiplier is always Actual Hours worked for rate variances. Exam Tip/Key Fact: Rate variances evaluate pricing/wage rate differences, while efficiency variances evaluate usage/hours differences.
Exam Relevance
- Topic: Cost Accounting
- Subtopic: Standard Costing & Variance Analysis
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