What is a rate variance?
Monday, October 18, 2010 at 9:33AM A rate variance is the difference between the actual price paid for something and the expected price, multiplied by the actual quantity purchased.
The formula is:
(Actual price - Standard price) x Actual quantity = Rate variance
The "rate" variance designation is most commonly applied to the labor rate variance, which involves the cost of direct labor in comparison to the standard cost of direct labor.
The "rate" variance uses a different designation when applied to the purchase of materials, and may be called the purchase price variance or the material price variance.
Related Topics
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Purchase price variance
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