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
To calculate the labor efficiency variables, subtract the hours worked by the hours budgeted, then multiply the result by the average hourly rate.
Labor Efficiency Variance Definition
A labor efficiency variance is defined as the total difference in cost between 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.