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 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.

## FAQ

**What is a good labor efficiency variance?**

Any positive number is considered good in a labor efficiency variance because that means you have spent less than what was budgeted.