Labour Rate of Pay Variance can be calculated by which one of the following equations ?
(Standard Wage Rate − Actual Wage Rate) × Actual Hours Worked
Labour cost variance splits into a rate (price) variance and an efficiency (usage) variance.
The rate of pay variance isolates the effect of paying a wage rate different from standard, so it is measured on the hours actually paid/worked: \(\text{LRV} = (\text{SR} - \text{AR}) \times \text{AH}\).
Budgeted cost minus actual cost is the total labour cost variance; the difference in hours valued at a rate is the efficiency variance (valued at standard rate, not actual); and using standard hours with the rate difference mixes the two variances, so these do not give the rate of pay variance.
Hence, the answer is (Standard Wage Rate − Actual Wage Rate) × Actual Hours Worked.
Important Questions from Standard costing
- Which one of the following is not correct with reference to standard costing ?
As per the information given below, what is the correct material yield variance ?
Standard input = 100 kg
Standard yield = 90 kg
Standard cost per kg of output = Rs. 20
Actual input = 200 kg
Actual yield = 182 kg
Actual cost per kg of output = Rs. 19
Given the information in the passage, what is the calendar variance for the month?
Find the fixed-overhead capacity variance using actual hours minus ORIGINAL budgeted hours, including the calendar effect as specified in the passage.
From given information in the passage, what is the volume variance of XYZ Ltd in given month?
