# Direct Labor Efficiency Variance Formula, Example

The unfavorable variance tells the management to look at the production process and identify where the loopholes are, and how to fix them. Any positive number is considered good in a labor efficiency variance because that means you have spent less than what was budgeted. To calculate the labor efficiency variables, subtract the hours worked by the hours budgeted, then multiply the result by the average hourly rate. Following is information about the company’s direct labor and its cost.

MI is a leading manufacturing company in the field

of making jeans. The management estimate that 2000 hours should be used for packing 1000 kinds of cotton or glass. It is a very important tool for management as it provides the management with a very close look at the efficiency of labor work. When an object falls into the ground due to planet’s own gravitational force is known a…

## Labor Efficiency Variance Calculator

An adverse labor efficiency variance suggests lower productivity of direct labor during a period compared with the standard. A favorable labor efficiency variance indicates better productivity of direct labor during a period. Labor efficiency variance compares the actual direct labor and estimated direct labor for units produced during the period.

• An adverse labor efficiency variance suggests lower productivity of direct labor during a period compared with the standard.
• If the company fails to control the efficiency of labor, then it becomes very difficult for the company to survive in the market.
• The direct labor variance is the difference between the actual labor hours used for production and the standard labor hours allowed for production on the standard labor hour rate.
• Labor efficiency variance compares the actual direct labor and estimated direct labor for units produced during the period.
• The management estimate that 2000 hours should be used for packing 1000 kinds of cotton or glass.

The direct labor variance is the difference between the actual labor hours used for production and the standard labor hours allowed for production on the standard labor hour rate. 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. 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.

## Quantity Variance Calculator

The purpose of calculating the direct labor efficiency variance is to measure the performance of the production department in utilizing the abilities of the workers. A positive value of direct labor efficiency variance is obtained when the standard direct labor hours allowed exceeds the actual direct labor hours used. A negative value of direct labor efficiency variance means that excess direct labor hours have been used in production, implying that the labor-force has under-performed.

The standard direct labor hours allowed (SH) in the above formula is the product of standard direct labor hours per unit and number of finished units actually produced. Unfavorable efficiency variance means that the actual labor hours are higher than expected for a certain amount of a unit’s production. Favorable variance means that the actual labor hours’ usage is less than the actual labor hour usage for a certain amount of production. Use the following information to calculate direct labor efficiency variance.

## Sales Volume Variance: Definition, Formula, Analysis, and Example

The following equation is used to calculate a labor efficiency variance. The result of efficiency variance is either favorable or unfavorable. Average acceleration is the object’s change in speed for a specific given time period. Measuring the efficiency of the labor department is as important as any other task. Standard costing plays a very important role in controlling labor costs while maximizing the labor department’s efficiency. If the company fails to control the efficiency of labor, then it becomes very difficult for the company to survive in the market.

• The standard direct labor hours allowed (SH) in the above formula is the product of standard direct labor hours per unit and number of finished units actually produced.
• The purpose of calculating the direct labor efficiency variance is to measure the performance of the production department in utilizing the abilities of the workers.
• The unfavorable variance tells the management to look at the production process and identify where the loopholes are, and how to fix them.
• To calculate the labor efficiency variables, subtract the hours worked by the hours budgeted, then multiply the result by the average hourly rate.
• When an object falls into the ground due to planet’s own gravitational force is known a…