In one sentenceThe effect of using more or fewer direct labor hours than the standard hours required for actual production, valued at the standard wage.
Simply put
You calculate how many hours actual production should have taken according to the standard, then compare that with the hours actually used.
Extra hours are an unfavorable variance, caused by machine breakdowns, waiting for materials, lack of training and poor work scheduling.
Worked example
A confectionery factory produced 1,000 boxes; the standard is half an hour per box at a wage of 40 SAR, and it actually used 520 hours.
Standard hours for actual production1,000 × 0.5 = 500 hours
Actual hours − Standard hours520 − 500 = 20 hours
× Standard rate20 × 40
Labor efficiency variance (unfavorable)800 SAR
Formula: (Actual hours − Standard hours for actual production) × Standard wage rate
Don't confuse it with
Labor rate varianceIt measures the price paid per hour, not the number of hours.
in FullScreen ERP
The attendance system supports integration with ZKTeco fingerprint devices, so actual working hours are available. HR and payroll