Question

The sum of the labor rate and labor efficiency variances will always add up to the total labor variance. true or False?

Answer 1

False. The sum of the labor rate variance and labor efficiency variance does not always add up to the total labor variance.

Step-by-step explanation:

False. The sum of the labor rate variance and labor efficiency variance does not always add up to the total labor variance. Let's break it down:

1. The labor rate variance measures the difference between the actual labor rate and the standard labor rate multiplied by the actual hours worked. It shows whether the labor costs were higher or lower than expected due to differences in the labor rate.
2. The labor efficiency variance measures the difference between the actual hours worked and the standard hours allowed for the actual output. It shows whether the labor productivity was higher or lower than expected.
3. The total labor variance is the sum of the labor rate variance and the labor efficiency variance. It represents the total difference between the actual labor costs and the standard labor costs for the actual output.

The labor rate variance and labor efficiency variance are independent of each other and can have either positive or negative values. Therefore, their sum may not always equal the total labor variance.