Labour rate variance = (Standard rate − Actual rate) × ?
ABudgeted hours
BStandard hours
CTime saved
DActual hours
Answer & Solution
Correct answer: D. Actual hours
1. Labour rate variance isolates the impact of paying a different rate than planned.
2. The valuation factor is actual hours worked, not standard hours.
3. Using actual hours captures the cost impact of the rate difference over the period.
4. Hence the formula uses actual hours.
_Source: ICAI BoS Inter Paper 3, Ch 13 "Standard Costing", §13.5.2 ¶2_
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