Question

What does an unfavourable labour efficiency variance indicate?

A) The actual labour rate was higher than the standard labour rate.
B) The labour rate variance must also be unfavourable.
C) Actual labour hours worked exceeded standard labour hours for the production level
achieved.
D) Overtime labour was used during the period.

Answer 1

An unfavourable labour efficiency variance indicates that actual labour hours worked exceeded the standard labour hours for the production level achieved.

Step-by-step explanation:

An unfavourable labour efficiency variance indicates that the actual labour hours worked exceeded the standard labour hours for the production level achieved. This means that more labour hours were used than expected, resulting in inefficiency. The variance can be calculated by multiplying the difference between actual and standard labour hours by the standard labour rate per hour. An unfavourable labour efficiency variance can have various causes, such as inexperienced or unskilled workers, poor supervision, or inefficient work processes.