A(n) ______ variance occurs when the standard direct labor hours expected for actual production differs from the actual direct labor hours used.

A(n) ______ variance occurs when the standard direct labor hours expected for actual production differs from the actual direct labor hours used.

• A. Labor
• B. Volume
• C. Efficiency
• D. Spending

Answer: (C)

Labor efficiency variance is being tested here. It measures how efficiently direct labor hours were used by comparing the standard hours that should have been required for the actual level of production with the actual hours worked. The calculation uses the standard hourly wage (rate) multiplied by the difference: (standard hours for actual production minus actual hours). If workers use more hours than the standard for the output, the variance is unfavorable; if they use fewer hours, it’s favorable. This focuses on the quantity of hours used, not the cost per hour, which is what other variances like the rate (spending) variance or the volume variance address.

Labor efficiency variance is being tested here. It measures how efficiently direct labor hours were used by comparing the standard hours that should have been required for the actual level of production with the actual hours worked. The calculation uses the standard hourly wage (rate) multiplied by the difference: (standard hours for actual production minus actual hours). If workers use more hours than the standard for the output, the variance is unfavorable; if they use fewer hours, it’s favorable. This focuses on the quantity of hours used, not the cost per hour, which is what other variances like the rate (spending) variance or the volume variance address.