Actual direct labor costs may differ from the flexible budget amounts because
A)the company may set a standard wage rate,but the market forces may require a change in that rate.
B)employees do not always operate at the desired efficiency level.
C)the company may set a standard wage rate,but the market forces may require a change in that rate or employees do not always operate at the desired efficiency level.
D)employees always operate at the desired efficiency level.

Question

Quizplus · Accepted Answer

Direct labor costs may differ from the flexible budget amounts due to various reasons. The company may set a standard wage rate, but market forces like inflation, supply and demand, etc. may impact the actual wage rates paid to employees. Additionally, employees may not always operate at the desired efficiency level due to various factors like skill level, training, motivation, etc. Therefore, both factors can cause the actual direct labor costs to deviate from the flexible budget amounts. Option C encompasses both these causes. Option A focuses only on one cause, and option D is incorrect as it assumes employees always work at the desired efficiency level, which is not the case in reality.

Actual Direct Labor Costs May Differ from the Flexible Budget