Direct labor time variance

Definition

Direct labor time variance measures the difference between the actual hours worked and the standard hours allowed for the actual production level. It reflects efficiency in labor usage during a specific period.

5 Must Know Facts For Your Next Test

1. Direct labor time variance is calculated as (Actual Hours - Standard Hours) x Standard Rate.
2. A favorable variance indicates that less time was taken than expected, while an unfavorable variance indicates more time was taken.
3. This variance helps managers identify inefficiencies in labor performance.
4. Factors contributing to direct labor time variance include worker skill levels, machine breakdowns, and scheduling issues.
5. It is crucial for cost control and operational efficiency assessments.

Review Questions

• How do you calculate direct labor time variance?
• What does a favorable direct labor time variance signify?
• Name three factors that can contribute to direct labor time variance.

Related terms

Standard Hours: The expected amount of hours required to produce a given level of output.

Actual Hours: The real amount of hours worked during a specific period.

Standard Rate: The predetermined cost per hour of direct labor.