{"id":214368,"date":"2025-05-14T07:15:42","date_gmt":"2025-05-14T07:15:42","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=214368"},"modified":"2025-05-14T07:15:45","modified_gmt":"2025-05-14T07:15:45","slug":"a-favorable-labor-rate-variance-indicates-that-2","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/05\/14\/a-favorable-labor-rate-variance-indicates-that-2\/","title":{"rendered":"A favorable labor rate variance indicates that"},"content":{"rendered":"\n

A favorable labor rate variance indicates that<\/p>\n\n\n\n

A. Actual hours exceed standard hours
B. Standard hours exceed actual hours
C. The actual rate exceeds the standard rate
D. The standard rate exceeds the actual rate<\/p>\n\n\n\n

The Correct Answer And Explanation is:<\/mark><\/strong><\/p>\n\n\n\n

Correct Answer: D. The standard rate exceeds the actual rate<\/strong><\/p>\n\n\n\n

Explanation:<\/h3>\n\n\n\n

A labor rate variance<\/strong> is a part of the total direct labor variance in cost accounting and managerial accounting. It specifically looks at the difference between the actual hourly wage paid to workers<\/strong> and the standard wage rate that was expected or budgeted<\/strong>, multiplied by the actual number of labor hours worked.<\/p>\n\n\n\n

The formula for Labor Rate Variance (LRV)<\/strong> is: Labor Rate Variance=(Standard Rate\u2212Actual Rate)\u00d7Actual Hours\\text{Labor Rate Variance} = (\\text{Standard Rate} – \\text{Actual Rate}) \\times \\text{Actual Hours}<\/p>\n\n\n\n

A favorable<\/strong> variance means that the company spent less on labor per hour than it had planned<\/strong>. This happens when:<\/p>\n\n\n\n

    \n
  • The actual wage rate is lower<\/strong> than the standard wage rate<\/strong>.<\/li>\n\n\n\n
  • In other words, the company paid workers less than expected<\/strong> for each hour worked.<\/li>\n<\/ul>\n\n\n\n

    Why Option D is Correct:<\/h3>\n\n\n\n

    D. The standard rate exceeds the actual rate<\/strong> \u2013 This means the wage rate the company expected to pay (standard) is more than<\/strong> what it actually paid (actual). When you subtract a smaller actual rate from a larger standard rate, the result is a positive<\/strong> number, leading to a favorable<\/strong> variance. This implies cost savings.<\/p>\n\n\n\n

    Why the Other Options Are Incorrect:<\/h3>\n\n\n\n
      \n
    • A. Actual hours exceed standard hours<\/strong> \u2013 This would affect the labor efficiency variance<\/strong>, not the labor rate variance. More actual hours typically lead to an unfavorable<\/strong> efficiency variance.<\/li>\n\n\n\n
    • B. Standard hours exceed actual hours<\/strong> \u2013 This could lead to a favorable efficiency variance<\/strong>, but again, it does not relate to the rate variance.<\/li>\n\n\n\n
    • C. The actual rate exceeds the standard rate<\/strong> \u2013 This results in an unfavorable<\/strong> labor rate variance, since the company paid more than planned for labor.<\/li>\n<\/ul>\n\n\n\n

      Conclusion:<\/h3>\n\n\n\n

      A favorable labor rate variance means that the company saved money on labor costs per hour<\/strong>. This happens when the standard (expected) rate is greater than the actual rate paid<\/strong>, making Option D<\/strong> the correct and most appropriate answer.<\/p>\n","protected":false},"excerpt":{"rendered":"

      A favorable labor rate variance indicates that A. Actual hours exceed standard hoursB. Standard hours exceed actual hoursC. The actual rate exceeds the standard rateD. The standard rate exceeds the actual rate The Correct Answer And Explanation is: Correct Answer: D. The standard rate exceeds the actual rate Explanation: A labor rate variance is a […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-214368","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/214368","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=214368"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/214368\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=214368"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=214368"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=214368"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}