Explanation : We multiply the excess direct labour hours by the standard wage rate to calculate the variance. This gives an adverse variance of £13,500. The formula for calculating the labour efficiency variance is:
the labour efficiency variance is equal to the difference between the standard labour hours for actual production (SH) and the actual labour hours worked (AH) during the period multiplied by the standard wage rate per hour (SR):
(SH – AH) × SR.
Labour Efficiency Variance
= SR (SH – AH)
Where SR = Standard wage rate per hours
SH = Standard Labour hours for actual production
AH = Actual hours worked
= 20(2000 – 2240)
= 20 (–240) = 4800 (UF).