ECONOMICS

Detailed explanation-1: -If the actual direct labor cost per unit is higher than the standard direct labor cost per unit, it means that the company incurs more to produce one unit of a product than is expected, making the cost unfavorable to the business.

Detailed explanation-2: -Labour Rate Variance (LRV) LRV will be an uncontrollable variance as labour rates are usually determined by demand and supply conditions in the labour market, backed by negotiation skills of the trade union. If the standard rate is higher, the variance is Favourable and vice versa.

Detailed explanation-3: -The direct labor cost formula is a simple equation for determining direct labor cost. The pay rate multiplied by the time spent working on the project yields the direct labor cost, or Direct Labor Cost= Pay Rate * Project Time.

Detailed explanation-4: -The average labor cost percentage should typically be in the range of 20% to 35% of a company’s gross sales. However, there are variations, depending on your field. It’s not uncommon for restaurants and other service businesses to have a labor cost percentage of up to 50%.