An unfavourable labour efficiency variance indicates that:
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.

Question

Quizplus · Accepted Answer

An unfavourable labour efficiency variance occurs when the actual labour hours worked exceed the standard labour hours for the production level achieved. This means that more labour was used than planned for the level of output, which would result in higher labour costs and lower efficiency. The other options are incorrect because an unfavourable labour rate variance would indicate that the actual labour rate was higher than the standard labour rate (not the efficiency variance), and the use of overtime labour does not necessarily indicate an unfavourable efficiency variance.

An Unfavourable Labour Efficiency Variance Indicates That