Answer (C) is correct . Material usage and labor efficiency variances both result from a deviation in the quantity of input from what was budgeted. They can be either directly or indirectly related. For instance, a reduction in the amount of material used may be compensated for by an increase in the amount of labor. By the same token, a reduction in overall activity on the production line may result in a decrease in both factors.
Answer (A) is incorrect because The actual price charged by suppliers for raw materials and the actual number of allocation-base units expended are unrelated.
Answer (B) is incorrect because The actual wage rates paid to workers and the actual number of allocation-base units expended are unrelated.
Answer (D) is incorrect because The labor efficiency variance is related to problems or the lack thereof in production departments; a volume variance is related to the use of capacity and may not be rooted in anything related to production (i.e., it could be caused by a lack of sales).
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