Question

Which of the following variances cannot occur together during the same accounting period? Multiple Choice Unfavorable labor rate variance and favorable labor efficiency variance. Unfavorable labor efficiency variance and favorable material quantity variance. Favorable labor rate variance and unfavorable total labor variance. Favorable labor efficiency variance and favorable material quantity variance. None of the other answers are correct, because all of these variance combinations are possible.

Answer 1

Answer: None of the other answers are correct, because all of these variance combinations are possible.

Explanation:

All of the above combinations are possible.

A company can have an Unfavorable labor rate variance and a favorable labor efficiency variance meaning that the actual labor rate was more than the budget rate but the budgeted labor Efficiency rate was more than the actual rate.

A company can also have an Unfavorable labor efficiency variance and a favorable material quantity variance meaning that even though labor Efficiency was not satisfactory, less materials were still used than were budgeted for.

There is also a possibility of a Favorable labor rate variance and unfavorable total labor variance and a Favorable labor efficiency variance and favorable material quantity variance can also happen together when actual direct labour and material quantity variance are both less than the budgeted amount.