Final answer:
A favorable direct labor efficiency variance is expected when lower-skilled employees work with better physical capital equipment, leading to higher productivity and potentially hiring fewer workers.
Step-by-step explanation:
A favorable direct labor efficiency variance would be expected when using employees with a lower skill level than specified in the standard cost sheet. This is because a favorable efficiency variance indicates that the labor hours used were less than the labor hours standardly budgeted.
If employees are working with more or better physical capital equipment, like the machinery mentioned, their productivity could be higher, even if they are paid lower wages than their more skilled counterparts. However, the firm might invest in more capital and hire fewer workers overall, which can impact labor variance.