The material variance terms "price" and "quantity" are replaced with the terms "rate" and "efficiency" when computing direct labor variances.
Let's delve deeper into the concepts of "rate" and "efficiency" when computing direct labor variances:
1. Rate (Replaces "Price"):
Definition: In the context of direct labor variances, "rate" refers to the cost per unit of time (e.g., per hour) for labor.
Calculation: Rate variance is calculated as the difference between the actual hourly rate paid to workers and the standard hourly rate expected.
2.Efficiency (Replaces "Quantity"):
Definition: "Efficiency" in direct labor variances relates to how efficiently labor resources are utilized in the production process.
Calculation: Efficiency variance is computed by comparing the actual hours worked to the standard hours allowed for the actual level of production.
When "price" and "quantity" terms are replaced with "rate" and "efficiency" in direct labor variances, the focus shifts to the cost of labor per unit of time and the effectiveness of labor utilization.
Complete Question:
The material variance terms price and quantity are replaced with the terms ____ and ____ when computing direct labor variances. (enter only one word per blank.)