Management accounting uses variance analysis to explain what and why something happened in the cost of producing products. It is done by comparing actual outcomes to expected, or standard, costs. What is the expectation when unplanned overtime is required to complete the job?
A) Unfavorable labor rate variance
B) Favorable labor rate variance
C) Unfavorable price variance
D) Favorable price variance

Question

Quizplus · Accepted Answer

Unplanned overtime usually leads to higher labor costs than expected because workers are often paid at a higher rate for overtime hours. This results in an unfavorable labor rate variance, as the actual labor costs exceed the standard or expected costs.

Management Accounting Uses Variance Analysis to Explain What and Why