Question

How can you tell if labor efficiency variance is favorable or unfavorable??

Answer 1

Answer:

Direct Labor Efficiency Variance = ( Actual Hours * Standard Rate ) - ( Standard Hours * Standard Rate)

Since if the Actual Direct Labor Hours used is less than the standard labor hours required for one unit of the product, then the variance is favorable.

Since if the Actual Direct Labor Hours used is more than the standard labor hours required for one unit of the product, the variance is unfavorable.

Note:

Standard Hours = Actual units produced*standard hours required per unit