Labour rate variance
The labour rate variance compares the standard hourly rate with the actual rate for the actual hours in the analysis. Favourable-positive formula is actual hours × (standard rate − actual rate). It may reflect wage changes, overtime premiums, worker grade or the mix of staff. Separate any idle-time treatment required by the question and consider whether a more expensive grade changed efficiency or quality. The rate difference alone does not establish controllability.
Worked example
Actual 500 hours cost $21 per hour against standard $20. Rate variance is 500 × ($20 − $21) = $500 adverse.
Common mistake
Do not use standard hours for actual output in the rate variance or overlook a separate convention for idle time and premiums.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | MA | Direct | September 2026–June 2027 |
| ACCA | PM | Supporting | September 2026–June 2027 |
| FIA | FMA | Direct | September 2026–June 2027 |