Usage or efficiency variance measures the difference between which?

Usage or efficiency variance measures the difference between which?

• A. The difference between the actual and expected resources used in production
• B. The difference between actual output and budgeted output
• C. The difference between planned and actual overhead
• D. The difference between actual labour hours and standard hours for actual output, valued at standard rate

Answer: (A)

Efficiency variance looks at how efficiently inputs are used in producing the actual output. It measures the gap between what was actually used of a resource and what should have been used for the level of output achieved. To calculate it, compare the actual quantity of the resource used with the standard quantity allowed for the actual output, and value that difference at the standard price per unit (for materials) or the standard rate per hour (for labour). If more resources are used than allowed, the variance is unfavorable; if fewer are used, it’s favorable. There is also a labour-specific form that uses actual hours versus standard hours for the actual output, but the broader usage/efficiency variance covers any resource and focuses on utilization efficiency rather than just total cost.

Efficiency variance looks at how efficiently inputs are used in producing the actual output. It measures the gap between what was actually used of a resource and what should have been used for the level of output achieved. To calculate it, compare the actual quantity of the resource used with the standard quantity allowed for the actual output, and value that difference at the standard price per unit (for materials) or the standard rate per hour (for labour). If more resources are used than allowed, the variance is unfavorable; if fewer are used, it’s favorable. There is also a labour-specific form that uses actual hours versus standard hours for the actual output, but the broader usage/efficiency variance covers any resource and focuses on utilization efficiency rather than just total cost.