Handley Manufacturing Company has prepared the following flexible budget for August and is in the process of interpreting the variances. F denotes a favorable variance and U denotes an unfavorable variance. Material A Material B Flexible Variances Budget Price Efficiency $50,000 $2,000F $4,000U 62,000 300U 1,600F Direct manufacturing labor 80,000 700U 2,300F The most likely explanation of the above direct manufacturing labor variances is that: A. the average wage rate paid to employees was less than expected. B. the company may have assigned more experienced employees this month than originally planned. C. management may have a problem with budget slack and might be using lax standards for both labor-wage rates and expected efficiency. D. employees did not work as efficiently as expected to accomplish the job.

Handley Manufacturing Company has prepared the following flexible budget for August and is in the process of interpreting the variances. F denotes a favorable variance and U denotes an unfavorable variance. Material A Material B Flexible Variances Budget Price Efficiency $50,000 $2,000F $4,000U 62,000 300U 1,600F Direct manufacturing labor 80,000 700U 2,300F The most likely explanation of the above direct manufacturing labor variances is that: A. the average wage rate paid to employees was less than expected. B. the company may have assigned more experienced employees this month than originally planned. C. management may have a problem with budget slack and might be using lax standards for both labor-wage rates and expected efficiency. D. employees did not work as efficiently as expected to accomplish the job.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter9: Standard Costing: A Functional-based Control Approach

Section: Chapter Questions

Problem 16E: Refer to the data in Exercise 9.15. Required: 1. Compute overhead variances using a two-variance...

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Recompute the variances from the second Acme Inc. exercise using $0.0725 as the standard cost of the material and $14 as the standard labor cost per hour. How has your explanation of the variances changed?
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