Final answer:
A favorable price variance for direct manufacturing labor often suggests that workers with lower skills have been hired to keep labor costs down. The correct answer is option: b) under skilled employees are being hired.
Step-by-step explanation:
A favorable price variance for direct manufacturing labor might indicate that underskilled employees are being hired. This occurrence suggests that the labor cost is lower than expected, which could be due to the employment of workers who command lower wages, potentially because they are less skilled. When a company is faced with union demands for higher wages, management may respond by investing in more machinery to increase labor productivity.
Nonetheless, this would likely mean hiring fewer workers, as automation replaces some labor needs. If management opts for a production method that requires less labor and more physical capital, such as additional machinery, it might indicate a shift towards higher labor productivity but also fewer employment opportunities.