Since in the question, the lower quality material is ordered so that less price can be given which required more hours to process the material as compared to the standard which results in unfavorable labor quantity variance
The formula to compute the labor quantity variance is shown below:
= Standard Rate × (Actual hours - Standard hours)
If the standard hours are more than actual hours than it leads to unfavorable instead of favorable
In order to be considered a material participant in a business, you have to work at least 100 hours. The IRS allows material participants to include business income as regular earned income, instead of passive income.
Since Lee worked more than 100 hours in each of these businesses, he will be considered a material participant in all of them.