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      Question

      Which of the following factors is NOT likely to cause an

      unfavourable Direct Labour Efficiency Variance?
      A Frequent machine breakdowns interrupting production Correct Answer Incorrect Answer
      B Lack of proper supervision of workers Correct Answer Incorrect Answer
      C Use of old, outdated or defective equipment Correct Answer Incorrect Answer
      D Poor training and low skill level of labour Correct Answer Incorrect Answer
      E Increase in direct material purchase price Correct Answer Incorrect Answer

      Solution

      Direct Labour Efficiency Variance  measures time efficiency of labour. So it is affected by factors that increase or reduce labour time .   An unfavourable Direct Labour Efficiency Variance occurs when the actual hours worked exceed the standard hours allowed for the output produced.   

      • Machine breakdowns means idle time leading to more hours used
      • Poor supervision leads to lower productivity
      • Old equipment would slow down work
      • Unskilled labour means extra time required for same work.
        All lead to higher actual hours and therefore unfavourable efficiency.   Direct material purchase price relates exclusively to material price variances. An increase in the price of raw materials does not inherently affect the amount of time or effort (efficiency) workers spend on the production line. 

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