Which statement best describes direct labour variances?
A) The labour rate and labour efficiency variances will always add up to the total labour variance.
B) The labour efficiency variance measures the difference between what was paid to direct labourers and what should have been paid.
C) The labour rate variance measures the difference between the labour hours that were actually used and the labour hours that should have been used.
D) The labour rate variance measures the difference between the labour hours that were originally budgeted and the labour hours that should have been used.

Question

Quizplus · Accepted Answer

Direct labour variances are comprised of two components: labour rate variance and labour efficiency variance. Therefore, the labour rate and labour efficiency variances will always add up to the total labour variance.

Note: Option B is incorrect because the labour efficiency variance measures the difference between the actual labour hours used and the standard labour hours allowed for the actual production achieved. Option C is incorrect as it describes the labour efficiency variance, not the labour rate variance. Option D is also incorrect as it describes the difference between budgeted and actual labour hours, rather than the labour rate variance.

Which Statement Best Describes Direct Labour Variances