If the labor efficiency variance is unfavorable, then actual hours exceeded stan
ID: 2432664 • Letter: I
Question
If the labor efficiency variance is unfavorable, then
actual hours exceeded standard hours allowed for the actual output.
standard hours allowed for the actual output exceeded actual hours.
the standard rate exceeded the actual rate.
the actual rate exceeded the standard rate.
a.actual hours exceeded standard hours allowed for the actual output.
b.standard hours allowed for the actual output exceeded actual hours.
c.the standard rate exceeded the actual rate.
d.the actual rate exceeded the standard rate.
Explanation / Answer
Answer is a.
Labor Efficiency Variance = (Actual hours - Standard hours allowed) * Standard labor rate per hour
Labor efficiency variance will be unfavourable if actual hours exceed standard hours allowed for the actual output.
Labor efficiency variance will be favourable if standard hours allowed for the actual output exceed standard hours.