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the material variance terms price and quantity are replaced with the terms and when computing direct labor variances. (enter only one word per blank.)

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Final answer:

In variance analysis, 'price' and 'quantity' variances for materials translate to 'rate' and 'efficiency' variances for direct labor.

Step-by-step explanation:

When computing direct labor variances, the material variance terms price and quantity are replaced with the terms rate and efficiency. This mirrors the way that in variance analysis for materials, price and quantity variances are considered; however, for labor, we refer to whether workers are being paid more or less than expected (rate variance) and whether they are working faster or slower than expected (efficiency variance).

User Ilija Eftimov
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The material variance terms "price" and "quantity" are replaced with the terms "rate" and "efficiency" when computing direct labor variances.

Let's delve deeper into the concepts of "rate" and "efficiency" when computing direct labor variances:

1. Rate (Replaces "Price"):

Definition: In the context of direct labor variances, "rate" refers to the cost per unit of time (e.g., per hour) for labor.

Calculation: Rate variance is calculated as the difference between the actual hourly rate paid to workers and the standard hourly rate expected.

2.Efficiency (Replaces "Quantity"):

Definition: "Efficiency" in direct labor variances relates to how efficiently labor resources are utilized in the production process.

Calculation: Efficiency variance is computed by comparing the actual hours worked to the standard hours allowed for the actual level of production.

When "price" and "quantity" terms are replaced with "rate" and "efficiency" in direct labor variances, the focus shifts to the cost of labor per unit of time and the effectiveness of labor utilization.

Complete Question:

The material variance terms price and quantity are replaced with the terms ____ and ____ when computing direct labor variances. (enter only one word per blank.)

User Jens Habegger
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