Total direct labor variance

Definition

Total direct labor variance measures the difference between the actual labor costs incurred and the standard labor costs for the actual production level. It highlights inefficiencies in labor cost management.

5 Must Know Facts For Your Next Test

1. Total direct labor variance is divided into two components: direct labor rate variance and direct labor efficiency variance.
2. A favorable total direct labor variance occurs when actual labor costs are less than standard costs.
3. An unfavorable total direct labor variance indicates higher actual labor costs compared to standard costs.
4. Total direct labor variance helps managers identify issues in wage rates or productivity levels.
5. Calculating total direct labor variance involves subtracting standard cost of actual hours worked from the actual cost of actual hours worked.

Review Questions

• What are the two components of total direct labor variance?
• How do you interpret a favorable total direct labor variance?
• Why is calculating total direct labor variance important for managers?

Related terms

Direct Labor Rate Variance: Measures the difference between the actual hourly wage paid and the standard hourly wage specified.

Direct Labor Efficiency Variance: Assesses the difference between the actual hours worked and the standard hours allowed for production.

Standard Costing: A system that uses standard costs for materials, labor, and overhead to measure performance.