Comprehensive and Detailed In-Depth Explanation:
A favorable labor efficiency variance (Option 1) occurs because experienced workers complete tasks more efficiently, reducing time and waste.
An adverse labor rate variance (Option 2) arises because hiring experienced employees increases labor costs compared to budgeted rates.
Option 3 (Adverse labor efficiency variance) is incorrect because skilled workers typically improve efficiency.
Option 4 (Favorable labor rate variance) is incorrect because higher wages increase costs, leading to an adverse variance.
Thus, the correct answer is A (1 and 2 only).
Reference: IIA Financial Management - Variance Analysis in Cost Accounting