Final answer:
Direct labor standards represent the expected time and cost to produce a single unit of a product. Option 2 is correct.
Step-by-step explanation:
Direct labor standards are a key component of cost accounting in business. They represent the expected time it should take to produce a single unit of a product and are stated in terms of both quantity and price. However, direct labor standards do not include the cost of employment taxes and benefits, as these are separate expenses. However, they are not based on actual labor wage rates but on predetermined rates reflecting what the cost should be under efficient operating conditions.
In the context of labor negotiations and efficiency, when unions push for higher wages, companies may shift towards using more capital-intensive production methods, employing fewer workers but with more equipment. This transition changes the firm's labor requirements and can have implications for overall labor productivity. Higher wages may lead to fewer hours of labor being required if the company opts to use more machines.