A company receives an unusually high number of orders in a month. To produce all of the orders within the scheduled dates of delivery, the company pays employees an extra $10 per hour for every hour of overtime the employees work. Which variance is directly impacted?

Question

Quizplus · Accepted Answer

The extra payment of $10 per hour for every hour of overtime directly impacts the labour price variance, as it increases the actual cost per hour of labour compared to the budgeted or standard cost. The labour efficiency variance is not impacted as it measures the usage or productivity of labour, not the cost. The materials price and efficiency variances are also not impacted as the question only mentions additional overtime payment for employees, not any changes in the cost or usage of materials.

A Company Receives an Unusually High Number of Orders in a Month