Answer (A) is correct . The direct labor price (rate) variance is the actual hours worked times the difference between the standard rate and the actual rate paid. This difference may be attributable to (1)?a change in labor rates since the establishment of the standards, (2)?using a single average standard rate despite different rates earned among different employees, (3)?assigning higher-paid workers to jobs estimated to require lower-paid workers (or vice versa), or (4)?paying hourly rates, but basing standards on piecework rates (or vice versa). The difference should not be caused by a union contract approved before the budgeting cycle because such rates would have been incorporated into the standards.
Answer (B) is incorrect because Predictions about labor rates may have been inaccurate.
Answer (C) is incorrect because Using a single average standard rate may lead to variances if some workers are paid more than others and the proportions of hours worked differ from estimates.
Answer (D) is incorrect because Assigning higher paid (and higher skilled) workers to jobs not requiring such skills leads to an unfavorable variance.
|
