There are two types of variances in case of labour.

**1) Wage Rate Variance**

If the variance is occuring due to the difference in wage rates (Actual v.s Standard), then it shall be called wage rate variance.

**2) Labour Efficiency Variance**

Efficiency relates to the labour hours. Let us suppose that we produced 100 units (Actual Production). The standard number of hours to produce ONE unit was set to 2(hours). It means that actual production of 100 units should take 200 hours of labour.

NOW if workers manage to complete 100 units in less than 200 hours, the labour efficiency variance would be favourable.

AND if 100 units take more than 200 hours. the resulting variance would be adverse.

The formula to calculate both labour variances are given below. You can print them after downloading. You can click on the image below to enlarge the view.

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