Skip to content

ACCA Applied Knowledge · Management Accounting · Variance calculations and analysis

Which of the following is the most likely cause of an adverse labour rate variance combined with a favourable labour efficiency variance?

Using more highly skilled, higher-paid workers is the most likely cause. They are paid above the standard rate, producing an adverse rate variance, but they work faster than standard and use fewer hours, producing a favourable efficiency variance.

  1. AUse of more highly skilled, higher-paid workers who work faster than standardCorrect
  2. BUse of untrained temporary staff paid below the standard rate
  3. CA machine breakdown causing idle time
  4. DPoor quality materials causing slower working

Explanation

Higher-paid skilled workers cost more per hour, giving an adverse rate variance, and they complete work in fewer hours, giving a favourable efficiency variance. Untrained staff paid less would produce the opposite pattern (favourable rate, adverse efficiency). Breakdowns and poor materials would produce adverse efficiency or idle time.

Did you get it right without looking?

One question tells you little. A timed set on Variance calculations and analysis shows your real accuracy, how long you take and where you lose marks.

Practise Variance calculations and analysisFree diagnostic mock

More Variance calculations and analysis questions