A labor variation occurs when the cost of labor to manufacture products is different from the normal or projected cost of labor. There are three major types of variance in labor. The variance in the price of labor is determined by subtracting the actual rate of pay from the budgeted standard rate, then multiplying that by the actual number of hours worked. The variance in the labor quantity can be determined when you multiply the rate of the normal by the variance between the budgeted hours against the actual hours budgeted. The entire direct variation in the labor rate is determined using the normal rate multiplied by the average number of hours, and then subtracting the sum from the rate that is actually paid and also the amount of hours.