The direct labor efficiency variance is (AQ ? SQ) × SP, or (AQ × SP) ? (SQ × SP). If the variance is favorable, the first number will be lower than the second number and the variance will be negative because AQ is lower than SQ; and it means the actual quantity of labor used was lower than the standard quantity allowed for the actual output. The variable overhead efficiency variance is budgeted variable overhead based on inputs actually used minus standard variable overhead applied to production. So if the actual quantity of labor used was lower than the standard quantity allowed for the actual output, then the first number will be lower than the second number and the variance will be negative. So if the direct labor efficiency variance is favorable, the variable overhead efficiency variance will also be favorable.
The direct labor efficiency variance is (AQ ? SQ) × SP, or (AQ × SP) ? (SQ × SP). If the variance is favorable, the first number will be lower than the second number and the variance will be negative because AQ is lower than SQ; and it means the actual quantity of labor used was lower than the standard quantity allowed for the actual output. The fixed overhead production-volume variance is budgeted fixed overheads minus the fixed overhead applied. Since these two variances have no information in common, there are no grounds for drawing any conclusions about the fixed overhead production volume variance from the direct labor efficiency variance.
The direct labor efficiency variance is (AQ ? SQ) × SP, or (AQ × SP) ? (SQ × SP). If the variance is favorable, the first number will be lower than the second number and the variance will be negative because AQ is lower than SQ; and it means the actual quantity of labor used was lower than the standard quantity allowed for the actual output. The variable overhead spending variance is actual total variable overhead incurred minus budgeted variable overhead based on inputs actually used. The difference between these two variances is that the second number of the direct labor efficiency variance is (SQ × SP), or the standard cost based on the standard quantity for the actual output, whereas the second number of the variable overhead spending variance is budgeted variable overhead based on inputs actually used (not standard inputs). Since the two formulas are essentially different, no conclusions can be drawn about whether or not a favorable direct labor efficiency variance means the variable overhead spending variance must also be favorable.
The direct labor efficiency variance is (AQ ? SQ) × SP, or (AQ × SP) ? (SQ × SP). If the variance is favorable, the first number will be lower than the second number and the variance will be negative because AQ is lower than SQ; and it means the actual quantity of labor used was lower than the standard quantity allowed for the actual output. The direct labor rate variance is the price variance for direct labor. The formula is (AP ? SP) × AQ, or (AP × AQ) ? (SP × AQ). Since these two variances are calculated in completely different ways, there are no grounds for drawing any conclusions about the direct labor rate variance from the direct labor efficiency variance.
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