Multiple Choice
Which of the following is NOT included in financial capital?
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1. Introduction to Accounting
Types of Accounting
Multiple Choice
An unfavorable labor efficiency variance can result from which of the following situations?
A
Using lower-skilled workers than expected
B
Producing more units than budgeted
C
Paying workers a higher wage rate than planned
D
Purchasing materials at a higher cost than standard
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, multiplied by the standard labor rate.
Analyze the term 'unfavorable variance': An unfavorable labor efficiency variance occurs when more hours are worked than expected to produce the same output, indicating inefficiency.
Evaluate the options provided: Consider how each situation impacts the efficiency of labor usage. For example, using lower-skilled workers than expected may lead to inefficiency as they may take longer to complete tasks.
Eliminate irrelevant options: Producing more units than budgeted does not directly cause inefficiency; it may increase total hours worked but not necessarily lead to an unfavorable variance. Similarly, paying workers a higher wage rate affects labor rate variance, not efficiency variance. Purchasing materials at a higher cost impacts material cost variance, not labor efficiency.
Conclude that the correct situation leading to an unfavorable labor efficiency variance is 'Using lower-skilled workers than expected,' as this directly impacts the efficiency of labor usage.
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