Discussion
The difference between standard cost of standard hours and standard cost of actual hours is called as .................. .
Answer: C
The difference is the labour efficiency variance.
Valuing both the standard hours and the actual hours at the standard rate isolates the effect of using more or fewer hours than allowed:
\[ \text{LEV} = SR \times (SH - AH) \]
where SR is the standard rate, SH the standard hours for actual output and AH the actual hours worked. It is favourable when workers take fewer hours than the standard.
The labour rate variance compares rates, \(AH \times (SR - AR)\). The labour cost variance is the total of rate and efficiency variances, and the labour mix variance compares the actual and standard mix of grades of labour.
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