Cake Lady Bakery is famous for its pound cakes.The main ingredient of the cakes is flour,which Cake Lady purchases by the pound.In addition,the production requires a certain amount of direct labor.Cake Lady uses a standard cost system,and at the end of the first quarter,there was an unfavorable direct labor cost variance.Which of the following is a logical explanation for that variance?
A) The cost of workers' medical insurance plans jumped up dramatically during the quarter.
B) The factory lost two experienced workers at the beginning of the quarter, and their replacements wasted a large amount of direct materials during their training period.
C) The purchasing manager was able to secure a volume discount on flour, purchasing the flour for less than the amount set by standard.
D) The production staff changed the work flow process so that production required fewer direct labor hours.

Question

Quizplus · Accepted Answer

The unfavorable direct labor cost variance indicates that the actual labor costs were higher than the standard or expected costs. A significant increase in the cost of workers' medical insurance plans would directly contribute to higher actual labor costs, explaining the variance.

Cake Lady Bakery Is Famous for Its Pound Cakes