Labor Rate Variance Calculator

It is a variance that takes place due to differences in the actual and standard rate of labor for actual hours worked. Similar to other variances, labor rate variance (LRV) also results in either a favorable variance or an unfavorable variance. When the actual payment on the same level of labor hours worked is less than what we have expected, it results in a positive or favorable variance. Same way, when the actual payment made to the workers for their same level of work is more than the standard or budgeted payment, it is a negative or unfavorable variance. The labor rate variance calculator is an online tool for calculating such variances. Favorable variances are denoted by F, while unfavorable variances are denoted by U.

The formula for calculating labor rate variance is as follows:

Labor Rate Variance = (SR – AR) * AH

Where SR = Standard Rate per Hour

AR = Actual Rate per Hour

AH = Actual Hours

Labor Rate Variance Calculator

How to Calculate using Calculator?

The user is supposed to enter the following data into the labor rate variance calculator for a quick calculation:

Standard Rate per Hour – Enter the amount of the standard rate. As stated above, the standard rate is the expected rate that requires consideration of various factors. It is crucial for the company to make a realistic estimate for determining the standard rate.

Actual Rate per Hour – Enter the actual per-hour rate of payment. This is the rate at which the labor actually gets payment.

Actual Hours – It means the total number of hours actually worked.

Sanjay Borad

Sanjay Bulaki Borad

MBA-Finance, CMA, CS, Insolvency Professional, B'Com

Sanjay Borad, Founder of eFinanceManagement, is a Management Consultant with 7 years of MNC experience and 11 years in Consultancy. He caters to clients with turnovers from 200 Million to 12,000 Million, including listed entities, and has vast industry experience in over 20 sectors. Additionally, he serves as a visiting faculty for Finance and Costing in MBA Colleges and CA, CMA Coaching Classes.

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