The labour efficiency variance is calculated as
A) (Actual direct labour hours used - Standard direct labour hours that should have been used) x Actual direct labour hours used
B) (Actual hourly wage rate - Standard hourly wage rate) x Standard direct labour hours that should have been used
C) (Actual direct labour hours used - Standard direct labour hours that should have been used) x Actual hourly wage rate
D) (Actual direct labour hours used - Standard direct labour hours that should have been used) x Standard hourly wage rate

Question

Quizplus · Accepted Answer

The labour efficiency variance measures the difference between the actual direct labour hours used and the standard direct labour hours that should have been used, multiplied by the standard hourly wage rate. Therefore, the correct formula for calculating the labour efficiency variance is (Actual direct labour hours used - Standard direct labour hours that should have been used) x Standard hourly wage rate. Choice D is the only option that matches this formula.

The Labour Efficiency Variance Is Calculated as