A favorable labor rate variance indicates that: A. Actual hours exceed standard hours.

A favorable labor rate variance indicates that:

A. Actual hours exceed standard hours.

B. Standard hours exceed actual hours.

C. The actual rate exceeds the standard rate.

D. The standard rate exceeds the actual rate.

Answer: B. Standard hours exceed actual hours.

A favourable labour rate variance shows that actual labour hours used to produce these goods were lower than the standard number of labour hours expected to be used to produce the same output. This means that the company was relatively better placed when it came to labour resource productivity thus meaning that the company was able to save some costs. In other words, a favourable labour variance is obtained when the actual number of hours taken to complete a particular task is comparatively lesser than the standard number of hours estimated for the task. This type of variation can be positively deviated from the labour cost norms and it helps in achieving better cost control as well as the profitability of the company.