Understanding Labour Efficiency Variance

What formula is used to calculate labor efficiency variance?

• Actual Hours Worked x (Actual Rate - Standard Rate)

• (Actual Hours Worked - Standard Hours Allowed) x Standard Rate

• Standard Hours Allowed x (Actual Rate - Standard Rate)

• Actual Hours Worked x Standard Rate

If the actual hours worked were 1,200 hours, the standard hours allowed for the actual production were 1,000 hours, and the standard rate per hour is $15, what is the labor efficiency variance?

• $3,000 Favorable

• $3,000 Unfavorable

• $2,000 Favorable

• $2,000 Unfavorable

A favorable labor efficiency variance indicates that:

• The actual hours worked were more than the standard hours allowed.

• The company paid more in wages than planned.

• The actual hours worked were less than the standard hours allowed.

• The standard rate per hour was set too high.

Which of the following is NOT a common cause of labor efficiency variance?

• Inadequate training

• Use of outdated machinery

• Lower raw material prices

• Changes in production methods

Improving labor efficiency variance can be achieved through:

• Increasing the standard hours allowed for production.

• Providing better training to employees.

• Paying higher wages to workers.

• Decreasing the quality of raw materials.

What does a negative labor efficiency variance signify?

• The company is operating efficiently.

• The actual labor cost was less than the standard labor cost.

• The actual labor cost was higher than the standard labor cost.

• The standard rate per hour needs to be adjusted.

Which factor is likely to cause an unfavorable labor efficiency variance?

• Overqualified workforce

• High employee morale

• Inefficient work processes

• Lower-than-expected wage rates

How can automation impact labor efficiency variance?

• It can lead to a more unfavorable variance due to high costs.

• It has no impact on labor efficiency variance.

• It can improve variance by reducing the actual hours worked.

• It increases the standard hours allowed, worsening the variance.

When analyzing labor efficiency variance, it is important to consider:

• Only the quantity of output.

• Only the quality of output.

• Both the quantity and quality of output.

• Neither the quantity nor the quality of output.

What role does employee motivation play in labor efficiency variance?

• No significant role

• It can lead to a favorable variance by increasing productivity.

• It can cause an unfavorable variance by increasing labor costs.

• It only affects the standard rate per hour.