1. A unfavorable direct labor rate variance indicates that the: a. the actual co
ID: 2463341 • Letter: 1
Question
1. A unfavorable direct labor rate variance indicates that the:
a. the actual cost of direct labor per hour was less than the standard cost of direct labor per hour.
b. both actual quantity and actual cost of direct labor hours exceeded standard quantity and standard cost of hours for actual output.
c.the actual quantity of direct labor hours worked exceeded the standard quantity of hours for actual output.
d. the actual direct labor cost per hour exceeded the standard direct labor cost per hour for actual output.
2.When actual capacity exceeds expected capacity, the result is a(n)
a. favorable fixed overhead volume variance.
b.unfavorable materials quantity variance.
c. favorable materials quantity variance
d. unfavorable overhead variance.
3. An unfavorable direct labor rate variance indicates that:
a.. the actual cost of direct labor per hour was less than the standard cost of direct labor per hour.
b.the actual quantity of direct labor hours worked exceeded the standard quantity of hours for actual output.
c. the actual direct labor cost per hour exceeded the standard direct labor cost per hour for actual output.
d. both actual quantity and actual cost of direct labor hours exceeded standard quantity and standard cost of hours for actual output.
4. An unfavorable direct labor rate variance and a favorable direct labor efficiency variance might indicate:
a.skilled workers using more actual hours than standard paid at a higher rate perhour than the standard rate
b. Unskilled workers using less actual hours than standard paid at a lesser rate per hour than the standard rate,
c. skilled workers using more actual hours than standard paid at a higher rate per hour than the standard rate.
d. unskilled workers using less actual hours than standard paid at a higher rate per hour than the standard rate.
Explanation / Answer
1)
d. the actual direct labor cost per hour exceeded the standard direct labor cost per hour for actual output.
When actual labour rate is greater than the standard labour rate, it causes the actual labour cost greater than the standard cost of labour for actual hours worked, thereby making the variance unfavourable.
2)
a. favorable fixed overhead volume variance.
Fixed overhead volume variance depnds upon Fixed overhead capacity variance and fixed overhead efficiency variance.
Fixed Overhead Capacity Variance calculates the variation in absorbed fixed production overheads attributable to the change in the number of manufacturing hours (i.e. labor hours or machine hours) as compared to the budget.
The variance can be calculated as follows:
Fixed Overhead Capacity Variance:
= (budgeted production hours - actual production hours) x FOAR*
* Fixed Overhead Absorption Rate / unit of hour
When the actual capcity exceeds the budgted capacity, the fixed overhead capcity variance is favourable which in turn makes the fixed overhead volume variance favourable.
3)
c. the actual direct labor cost per hour exceeded the standard direct labor cost per hour for actual output
Direct labour rate variance = (actual rate - standard labour rate) x actual hours worked
when actual direct labour rate exceeds the standard labour rate per hour, the variance is unfavourable.
4)
d. unskilled workers using less actual hours than standard paid at a higher rate per hour than the standard rate.
Direct Labor Rate Variance is the measure of difference between the actual cost of direct labor and the standard cost of direct labor utilized during a period.
Direct Labor Efficiency Variance is the measure of difference between the standard cost of actual number of direct labor hours utilized during a period and the standard hours of direct labor for the level of output achieved.
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