Time variance

A time variance is the difference between the standard hours and actual hours assigned to a job. The concept is used in standard costing to identify inefficiencies in a production process. The variance is then multiplied by the standard cost per hour to quantify the monetary value of the variance.

The main problem with the time variance concept is that it is calculated from a baseline that may have been poorly derived. Thus, if the baseline time goal was overly optimistic, there will always be an unfavorable time variance, no matter how efficiently the work may be conducted.

Related Courses

Cost Accounting Fundamentals