An Unfavorable Labor Efficiency Variance Is Most Likely to Occur

question 30

Multiple Choice

An unfavorable labor efficiency variance is most likely to occur if:

• A)Employees are paid at an overtime wage rate.
• B)Employees are inefficient and units must be reworked.
• C)Labor cost per unit exceeds materials costs per unit.
• D)Employee turnover rates are low.

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Definitions:

Accounts Receivable

Money owed to a business by its customers for goods or services delivered or used but not yet paid for.

Maker

In financial terms, the party that creates or issues a financial instrument, such as a check or promissory note.

Payee

The individual or entity to whom a payment is to be made or credited.

Allowance Account

A contra-asset account used to record adjustments to accounts receivable, reflecting the amounts expected not to be collected.