The formula for measuring labor efficiency variance is:
Standard hours allowed for production (SH) – actual hours taken (AH) × standard rate per direct labor hour (SR) = labor efficiency variance.
25 hours - 40 hours x $150 per hour = -$2,250.
More items...•Aug 4, 2021
Direct labor rate variance (also called direct labor price or spending variance) is the difference between the total cost of direct labor at standard cost (i.e. direct labor hours at standard rate) and the actual direct labor cost.
Direct labor efficiency variance also called direct labor usage variance is the difference between the standard cost of standard direct labor hours allowed for actual production and the standard cost of labor hours actually used in production.
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