All 38 Variance Analysis questions
More in Variance Analysis
What are the sales variances (price and volume)? How do variances reconcile budgeted profit to actual profit (an operating statement)? How do you decide which variances to investigate? What are the possible causes of an adverse material usage variance? What are ideal, attainable, and basic standards? What is the sales mix variance? What is the sales quantity variance? What is the significance of controllable versus uncontrollable variances? How does the timing of the materials price variance calculation matter? How do you decide the significance of a variance statistically?
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Budgeting & Forecasting › Variance Analysis

What are the possible causes of an adverse labor efficiency variance?

Intermediate

Answer

Causes include low staff morale or motivation, inadequate training, poor supervision, low-quality materials that slow work, machine breakdowns or waiting time, unrealistic (tight) standards, and disruptions like changeovers. As with materials, causes may link to other variances—e.g., cheaper but less-skilled labor (favorable rate) working slower.
Real-world example Frequent machine breakdowns cause idle time, producing an adverse labor efficiency variance.

Common follow-ups: How can it link to the rate variance? | What actions address it?

Variance Analysis The Budgeting Process Variance Analysis
All 38 Variance Analysis questions