Question

Which of the following can be a reason for a favorable efficiency variance for direct labor?...

Which of the following can be a reason for a favorable efficiency variance for direct labor?

Group of answer choices

an unexpected increase in the price of materials

a decrease in the price of labor due to an oversupply of workers

workers taking less time to produce the products

less amount of material used during production than planned for actual output

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Answer #1

Favourable efficiency variance of direct labour is related the time taken by the labour in producing one unit. This variance is not affected by any change in price of raw material or amount of material to be used in production as this is related to material variance.

Also a decrease in price of labour will affect the labour cost variance as it takes into consideration the total amount of cost incurred on direct Labor.

So if the workers takes less time to produce the product then it will be a favourable efficiency variance as the efficiency of the labour will increase.

Therefore the correct option is 3rd.

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