A manufacturing company uses skilled labor for production on a special rush order. A small accidental fire in the production facility required the hospitalization of most of the skilled production workers. At the same time, a group of semiskilled workers producing an entirely different product in another department was completely idled by a lack of materials caused by a transportation strike. In order to complete the special order on time, the company put the semiskilled workers on its production. Without the needed skill, the special order resulted in a high unfavorable labor efficiency variance. The overall labor variance, however, was highly favorable because the semiskilled workers are paid less than the skilled workers.

Observing the large rate and efficiency variances, a manager commented, "Either the standards are wrong, or we are paying too much for skilled labor, or both." Discuss this comment and the situation that elicited it.