Multiple Choice
The cash conversion cycle is computed as:
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1. Introduction to Accounting
Useful Information
Multiple Choice
When fewer hours are worked than the standard hours allowed, the labor efficiency variance is:
A
Unfavorable
B
Zero
C
Favorable
D
Cannot be determined
Verified step by step guidance1
Understand the concept of labor efficiency variance: It measures the difference between the actual hours worked and the standard hours allowed for the actual production level. A favorable variance occurs when fewer hours are worked than the standard hours allowed, indicating efficient use of labor.
Identify the formula for labor efficiency variance: Labor Efficiency Variance = (Standard Hours - Actual Hours) × Standard Rate.
Analyze the scenario: If fewer hours are worked than the standard hours allowed, the difference (Standard Hours - Actual Hours) will be positive, leading to a favorable variance.
Consider the implications: A favorable labor efficiency variance suggests that the workforce was able to complete the required production in less time than expected, which is beneficial for the company.
Conclude the reasoning: Based on the formula and analysis, the labor efficiency variance is favorable when fewer hours are worked than the standard hours allowed.
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