The total direct labor variance can be broken down into two components: the efficiency variance and the price variance.

Question

Quizplus · Accepted Answer

The total direct labor variance is indeed made up of the efficiency variance and the price variance. The efficiency variance is caused by differences in the actual labor hours used versus the standard labor hours that should have been used to produce a given level of output. The price variance, on the other hand, is caused by differences in the actual labor rate paid versus the standard labor rate that was expected.

The Total Direct Labor Variance Can Be Broken Down into Two