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(actual time * standard rate) - (standard time * standard rate)
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What does a credit balance in a direct labor efficiency variance account indicate?
The average wage rate paid to direct labour employees was less than the standard rate.
What does a debit balance in the labor efficiency variance account indicate?
a debit balance in the labor efficiency variance account indicates that actual rate and actual hours exceed standard rates and standard hours
What does an unfavorable direct labor price variance indicate?
Unfavorrable direct labor price variance indicates that business has incurred more direct labor cost for production of units of product then standard labor cost. For example if standard cost of direct labor for producing 1 unit is 10 and company incurred 105 for making 10 units then extra 5 is unfavorable direct labor cost variance.
What causes direct labour rate variance?
Direct labor rate variance is caused by a change in the hourly rate from what you initially planned.
How does poor quality materials affect direct labor variance?
If poor quality materials are used it may cause insufficient demand for the products. Insufficient demand may not keep workers busy. If the workers are not being laid off, and unfavorable labor efficiency variance will often be recorded.
Why are variances generally segregated in terms of a price variance and an efficiency variance?
Efficiency Varian materials and direct labor, the variances were recorded in specific general ledger accounts.
What does a credit balance in a direct labor efficiency variance account indicate?
The average wage rate paid to direct labour employees was less than the standard rate.
What factors causes Budget Variance?
There are 7 variances associated with a budget ( which are generally calculated for controlling purposes) 1- Material Price variance 2- Material Quantity variance 3- Labor rate variance 4- Labor efficiency variance 5- Spending variance 6- Efficiency variance 7- Capacity variance
What does a debit balance in the labor efficiency variance account indicate?
a debit balance in the labor efficiency variance account indicates that actual rate and actual hours exceed standard rates and standard hours
What does an unfavorable direct labor price variance indicate?
Unfavorrable direct labor price variance indicates that business has incurred more direct labor cost for production of units of product then standard labor cost. For example if standard cost of direct labor for producing 1 unit is 10 and company incurred 105 for making 10 units then extra 5 is unfavorable direct labor cost variance.
What causes direct labour rate variance?
Direct labor rate variance is caused by a change in the hourly rate from what you initially planned.
How does poor quality materials affect direct labor variance?
If poor quality materials are used it may cause insufficient demand for the products. Insufficient demand may not keep workers busy. If the workers are not being laid off, and unfavorable labor efficiency variance will often be recorded.
Will the direct labor price variance always be unfavorable if more hours are worked than the standard hours allowed for the actual output attained?
No, Direct labor price variance is created due to difference in standard labor rate and actual labor rate for example standard labor rate per unit is 10 and actual labor rate is 11 then 1 per unit is unfavourable direct labor price variance.
Labor Efficiency Variance resulting from the use of poor quality materials should be charged to?
the production manager
What are three reasons for an unfavorable direct manufacturing labor efficiency variance?
1) semi-skilled worker performing skilled work 2) inferior raw materials 3) poor process scheduling
What is the relationship between learning curve and direct labor variance?
Labor efficiency variance in layman terms, is how much production to expect from an individual over a given time frame. This means, you should expect to see a drop in the labor efficiency variance while teaching a new employee at the same position. With this information, you will be able to account for the loss in production throughout the learning curve phase of a new hire. This is a very important number for large factories and manufacturing plants that carry a potential loss of millions of dollars over minutes if production is lacking.
What is direct labor variance?
It means the difference between the budgeted or estimated direct labour cost at the start of work activity with the actual direct labour cost at the end of activity or fiscal year. If budgeted cost is more then the actuall then it is favourable variance otherwise it is unfavourable direct labour cost variance
