A favorable direct labor efficiency variance indicates which of the following?

A favorable direct labor efficiency variance indicates that actual labor hours used for production were less than the standard hours that had been budgeted for that level of output. This situation is beneficial because it suggests that workers are operating more efficiently than expected, completing the necessary tasks in less time than anticipated. When actual hours are fewer than the standard, it reflects positively on workforce performance, as it can correlate with increased productivity or effective management of labor resources.

In contrast, higher wages paid to workers would not indicate efficiency; rather, it pertains to labor cost difference rather than efficiency of hours worked. More overtime hours might suggest inefficiencies if extra capacity was required, increasing costs without improving efficiency. Production overruns typically point to excess production beyond what was budgeted, which can imply wasted resources rather than efficiency improvements. Thus, a favorable direct labor efficiency variance directly ties back to the better performance of labor in meeting or exceeding productivity standards.