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Numbers 1 & 2 are worth 2 points each.
1. True or false: standards are used to help break down activity variances into two categories: price variances
and quantity variances.
2. True or false: when direct labor is used as the basis for applying standard VMOH rates, if the direct labor
efficiency variance is favorable, the variable overhead efficiency variance will be unfavorable.
3. Short answer, worth 3 points. Tell as much as you know, based on the information we've learned in
chapter 10. Feel free to add more rows to the answer box if you need more space.
What does an unfavorable labor efficiency variance mean? What could be the cause of such a variance?
An unfavorable labor efficiency variance means that labor efficiency has worsened, meaning that the actual
hours incurred are more than the standard hours allowed. For example, if a company incurs 1,000 actual
direct labor hours and the standard allowed number of direct labor hours is 800, then the company has
unfavorable labor efficiency variance since more hours have been used. Causes of unfavarable labor efficiency...
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