Enter the number of direct labor hours budgeted, the number of direct hours actually worked, and the average hourly rate into the calculator to determine the labor efficiency variance.
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Labor Efficiency Variance Formula
The following equation is used to calculate a labor efficiency variance.
LEV =(LB – HW)* LR
- Where LEV is the labor efficiency variance
- LB is the labor hours budgeted
- HW is the total hours actually worked
- LR is the average hourly labor rate
Labor Efficiency Variance Definition
A labor efficiency variance is defined as the total difference in cost between a budgeted labor hours and the actual labor hours worked on a job.
Labor Efficiency Variance Example
How to calculate labor efficiency variance?
- First, determine the budgeted hours.
Determine the total number of direct labor hours budgeted for the job.
- Next, determine the hours worked.
Measure the total hours of direct labor actually worked.
- Next, determine the labor rate.
Calculate the average labor rate per hour.
- Finally, calculate the labor efficiency variance.
Calculate the LEV using the equation above.
Any positive number is considered good in a labor efficiency variance because that means you have spent less than what was budgeted.