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direct labour rate of pay 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 rate paid to direct labour for an activity with the standard rate of pay allowed for that activity for the actual hours worked. The resultant adverse or favourable variance is the amount by which the budgeted profit is affected by differences in direct labour rates of pay. The formulae for this variance are: (standard rate per hour – actual rate per hour) × actual hours worked,

(standard rate per hour – actual rate per hour) × actual hours worked,

or alternatively:(standard rate per hour × actual hours worked) – actual wages paid.

(standard rate per hour × actual hours worked) – actual wages paid.

Subjects: Accounting.


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