Tulley Manufacturing has an unfavorable direct labor rate variance. Which of the following would be the most likely reason for this variance?
A) The company used lower-paid workers in the production process than they had expected.
B) Employees took a longer amount of time to produce the product than expected.
C) The company gave employees an unexpected raise due to union negotiations.
D) Employees used more direct materials in the production process than expected.

Question

Quizplus · Accepted Answer

An unfavorable direct labor rate variance occurs when the actual rate paid for labor is higher than the expected or standard rate. This could happen if the company had to give employees an unexpected raise, perhaps due to union negotiations, thus increasing the cost of labor beyond what was planned.

Tulley Manufacturing Has an Unfavorable Direct Labor Rate Variance