A Favorable Direct Labor Efficiency Variance and an Unfavorable Direct

question 98

Multiple Choice

A favorable direct labor efficiency variance and an unfavorable direct labor rate variance might indicate which of the following?

• A)Unskilled workers using more actual hours than standard, paid at a higher rate per hour than the standard rate
• B)Unskilled workers using less actual hours than standard, paid a lesser rate per hour than the standard rate
• C)Skilled workers using less actual hours than standard, paid at a higher rate per hour than the standard rate
• D)Skilled workers using more actual hours than standard, paid at a higher rate per hour than the standard rate

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Definitions:

Capital Budgeting Technique

Methods used by companies to evaluate and select investments in long-term assets based on their potential to generate cash flows in the future.

Profitability Index

A financial metric used to evaluate the desirability of an investment, calculated as the present value of future cash flows divided by the initial investment.

Payback Period

The duration required for an investment to generate cash flows sufficient to recover its initial cost.

AAR

Average Annual Return, which measures the average return generated by an investment per year over a specified period.