The labor rate variance measures the productivity of direct labor.

Actually, the labor rate variance doesn't measure the productivity of direct labor. Instead, it measures the difference between the actual hourly labor rate paid and the standard hourly labor rate that was expected to be paid. It's a part of variance analysis in managerial accounting that helps managers understand why there's a difference between expected labor costs and actual labor costs.

Here's a step-by-step explanation:

1. Determine the standard labor rate per hour. This is the amount that the company expects to pay per hour of labor.

2. Determine the actual labor rate per hour. This is the amount that the company actually paid per hour of labor.

3. Subtract the standard rate from the actual rate. This will give you the rate variance.

4. Multiply the rate variance by the actual number of hours worked. This will give you the labor rate variance.

If the labor rate variance is positive, it means that the company paid more for labor than expected. If it's negative, it means that the company paid less for labor than expected.