When fewer hours are worked than the standard hours allowed, the labor efficiency variance is:

• A. Unfavorable
• B. Zero
• C. Favorable
• D. Cannot be determined

Answer: (C)

Verified step by step guidance

1. Understand the concept of labor efficiency variance: It measures the difference between the actual hours worked and the standard hours allowed for the actual production level. A favorable variance occurs when fewer hours are worked than the standard hours allowed, indicating efficient use of labor.
2. Identify the formula for labor efficiency variance: Labor Efficiency Variance = (Standard Hours - Actual Hours) × Standard Rate.
3. Analyze the scenario: If fewer hours are worked than the standard hours allowed, the difference (Standard Hours - Actual Hours) will be positive, leading to a favorable variance.
4. Consider the implications: A favorable labor efficiency variance suggests that the workforce was able to complete the required production in less time than expected, which is beneficial for the company.
5. Conclude the reasoning: Based on the formula and analysis, the labor efficiency variance is favorable when fewer hours are worked than the standard hours allowed.