Question

Poseidon Marine Stores Company manufactures special metallic materials and decorative fittings for luxury yachts that require highly skilled labor. Poseidon uses standard costs to prepare its flexible budget. For the first quarter of the​ year, direct materials and direct labor standards for one of their popular products were as​ follows:

Direct​ materials: pounds per​ unit; per pound
Direct​ labor: hours per​ unit; per hour
Poseidon produced units during the quarter. At the end of the​ quarter, an examination of the labor costs records showed that the direct labor cost variance was F. Which of the following is a logical explanation for this​ variance?
A. The company paid a lower cost for the direct materials than allowed by the standards.
B. The company used a lower quantity of direct materials than allowed by the standards.
C. The company paid a lower cost per hour for labor than allowed by the standards.
D. The company used fewer labor hours than allowed by the standards,

Answer 1

The company paid a lower cost per hour for labor than allowed by the standards.

Step-by-step explanation:

The labour cost variance is the difference between the standard labour cost allowed for the actual hours worked and the actual labor cost for the same hours

The labour cost variance compares the actual cost and the standard cost for the actual labour hours paid for.

Hence , Poseidon Marine Stores Company would have paid a sum for labour cost which is lower than the standard cost.

The company paid a lower cost per hour for labor than allowed by the standards.