Question

Bailey Furniture Company has prepared the following flexible budget for April and is in the process of interpreting the variances. F denotes a favorable variance and U denotes an unfavorable variance. Flexible Budget Price Variance Efficiency Variance Material A $50,000 $2,600 F $4,200 U Material B $78,000 $1,500 U $2,900 F Direct manufacturing labor $95,000 $1,200 U $3,700 F The most likely explanation of the above direct manufacturing labor variances is that

Answer 1

See notes below

Step-by-step explanation:

Rate variance

The rate variance is the the difference between the standard labor cost of the actual hours paid for and the actual cost.

Possible reasons:

An increase in wage rate

Skilled workers were as against using the unskilled workers planned for

Efficiency variance

Labour efficiency variance is the difference between the actual time taken to achieve a given production output less the standard hours allowed for same multiplied by the standard labour rate

Possible reasons:

The use of skilled workers who worked faster than the unskilled workers planed for

The workers were trained making them more efficient in saving time