Question

How is labor rate variance computed?

Answer 1

Labor Rate variance shows the difference in Labor cost due to labor rate provided.

It is calculated as :

Labor Rate Variance = (Standard Rate - Actual Rate) * Actual hours

For Example If

Standard Rate	$ 10.00
Standard hours	35,000
Actual rate	$ 12.00
Actual hours	40,000

Then

Labor Rate Variance =	(Standard Rate - Actual Rate) * Actual hours
Labor Rate Variance =	( $ 10 - $ 12) * 40000
Labor Rate Variance =	$ (80,000) or $ 80,000 Adverse

In case of any doubt or clarification, you're welcome to come back via comments.