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direct labour efficiency variance


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In a standard costing system, a variance arising as part of the direct labour total cost variance. It compares the actual labour time taken to carry out an activity with the standard time allowed and values the difference at the standard direct labour rate per hour. The resultant adverse or favourable variance is the amount by which the budgeted profit is affected by virtue of labour efficiency. The formula for this variance is:(standard hours allowed for production – actual hours taken) × standard rate per direct labour hour.

(standard hours allowed for production – actual hours taken) × standard rate per direct labour hour.

Subjects: Accounting.


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