What does a negative direct labor efficiency variance indicate?
Practice Questions
1 question
Q1
What does a negative direct labor efficiency variance indicate?
Workers are more efficient than expected
Workers are less efficient than expected
Labor costs are lower than budgeted
Labor costs are higher than budgeted
A negative direct labor efficiency variance indicates that workers are less efficient than expected, leading to higher labor costs.
Questions & Step-by-step Solutions
1 item
Q
Q: What does a negative direct labor efficiency variance indicate?
Solution: A negative direct labor efficiency variance indicates that workers are less efficient than expected, leading to higher labor costs.
Steps: 4
Step 1: Understand what direct labor efficiency variance means. It compares the actual labor hours worked to the expected labor hours for the production level.
Step 2: Recognize that a negative variance occurs when actual labor hours are greater than expected hours.
Step 3: Realize that this means workers took more time to complete their tasks than planned.
Step 4: Conclude that because workers are less efficient, the company has to pay more in labor costs than anticipated.
